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BFCSA: ASIC Chairman Greg Medcraft proves to be the "invisible man" yet again!

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Incomprehensible, inept and just wrong

WHAT Peter Mason, the soon-to-be ex-chairman of David Jones, did was utterly incomprehensible. It was also very badly wrong. 

What the ‘invisible man,’ Greg Medcraft, still the chairman of ASIC, did NOT do, was merely embarrassingly inept. It was also plain wrong. 

Late last year Mason, who’s been a respected and highly successful investment banker for over 40 years and an effective non-executive company director more recently, signed off as the company’s chairman, on two DJ directors buying shares in the company. 

That in itself would be unremarkable; and we normally would never even hear about it. Except, that three days after the two directors, Steve Vamos and Leigh Clapham, went ahead and bought their shares, DJ released its first quarter sales numbers. 

Sales bettered market expectations and the DJ share price leapt 6.6 per cent. If the coincidence of events is not eyebrow-raising, I don’t know what would be. 

Now, one does not have to assume that the two directors or even Mason knew that sales had done better than expected — although such ‘non-knowledge’ would pose its own disturbing questions — to assert that buying shares in the company three days before such an announcement was, not should have been, WAS, an absolute no-no. 

That’s why it is utterly incomprehensible that Mason signed off on the buying. It should have taken a millisecond of thought to sign off on purchases to be executed only AFTER the announcement. 

I’d add, that the two directors showed appalling lack of judgment in seeking to buy before the announcement. Indeed, presented with such a request, a chairman should have been responding not with approval but a reprimand. 

Two weeks ago, we found out something further, which would have sent those raised-eyebrows through the average hairline. 

It became public that the DAY BEFORE the two directors bought their shares, Mason as DJ chairman had received a formal approach from competitor Myer proposing a nil-premium merger. If the two directors — and the rest of the DJ board — weren’t immediately told by Mason, they should have been. 

If Mason was unable to realise that directors buying shares in the company before a sales announcement was inappropriate, he should have realised that buying shares in the company before such an announcement AND after receiving a merger proposal, just might fail the old-fashioned ‘smell test.’ 

Now to ASIC. This would seem a pretty good opportunity for the chairman — assuming he was visiting from his busy travel schedule — to make some telling points about good corporate governance. 

Alas, the ‘invisible man’ stayed invisible. Instead we got a bizarre ‘statement’ from another ASIC commissioner, John Price, by way of a YouTube video. 

Price revealed that ASIC had issued a ‘No further action” letter to DJ over the share-buying. 

“ASIC has examined this matter thoroughly, including the Myer proposal, and decided that there is not sufficient evidence to take enforcement action at this time,” he says in the video. 

“This decision is not an exoneration or a tick of approval, and if new evidence comes to light, the matter can always be reopened,” Price said. 

Price went on to detail the factors that had to be established for a successful prosecution for insider trading. 

Then followed a sort of plea for understanding how tough life was for ASIC: “proving all these things is generally a hard thing to do.” 

Followed by a thundering statement of how resolute ASIC would always be, notwithstanding: that, where there was evidence, “we will pursue insider traders, no matter who they are, from the chairman of the board through to junior staff.” 

I’m just surprised he didn’t declaim that ASIC would pursue them on “the beaches, the fields, the streets, the hills,” and, of course, the trading screens. 

Earth to ASIC: we and you don’t live in a binary world. The choices are not just ‘insider trading’ or ‘nothing.’ That’s like saying there’s nothing between murder and innocence — no manslaughter, no GBH, no assault. 

The DJ situation might not have been insider trading, but it sure as hell was dreadful corporate governance. By the two directors, most of all by the chairman, and arguably the rest of the DJ board. 

Not for them, in relation to the share trades, but in their implicit — or explicit — ‘signing off’ on the decision taken not to disclose the Myer approach. 

There’s a fundamental internal inconsistency, by the by, in relation to the Myer non-disclosure. Two years ago, DJ — true, under a different chairman — DID choose to disclose an utterly nonsense ‘takeover proposal’ from some offshore idiot. 

But it chose not to disclose a substantive proposal — that is not going to go away, because of the reality of the challenges the two companies face — from a very credible source. 

What’s also got lost in this, is that it would appear that DJ’s protocols on share-buying by directors explicitly endorses such pre-announcement share-buying. 

At the AGM after this happened, Mason said that the company had a share trading policy and “limited trading windows during which directors can acquire shares in the company.” (my emphasis) 

By implication, the two directors bought in such a formal DJ window. This is beyond bizarre; and should have sparked an immediate response from ASIC. 

Worse than the ASIC chairman failing to seize the opportunity, we now have an all-but explicit endorsement from him, that it is perfectly OK for any company director to buy shares in the company three days before a sales announcement. 

Perhaps next time Medcraft is visiting Australia, he could advise whether that goes for profit announcements as well. Indeed, he could do that by YouTube video from anywhere in the world he happens to be. 

In my humble opinion, an ASIC chairman him or herself should have seized the opportunity to read the riot act to Mason, the two directors and corporate Australia more generally. 

Medcraft, not Price, and not via a YouTube video, should have spelt out to the directors that such share buying was fundamentally unacceptable, even if it did not constitute insider trading, and even if it was well-intentioned as claimed, in showing support for the company. 

Medcraft, not Price, and not via a YouTube video, should have spelt this message out to corporate Australia in general, that any board protocol that allowed such share buying was wrong and should — sorry, MUST — be changed.

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  • doyla66
    doyla66 Monday, 17 February 2014


    I hope the senators get to read this column in the paper and understand how pathetic and lazy ASIC's performance really is.

  • doyla66
    doyla66 Saturday, 22 February 2014

    Proof what good is it...

    Even when you have all documents to prove Fraud is committed that doesn't seem to help get justice, the victims want this so bad... FOS and COSL know the truth and just cast consumer like me aside.

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