1. By virtue of s 920A(1) of the Act the Commission may make a "banning order", i.e. an order prohibiting a person from providing any financial services or specified financial services in specified circumstances or capacities permanently or for a finite period, if[5]:

"(e) the person has not complied with a financial services law; or

(f) ASIC has reason to believe that the person will not comply with a financial services law."

1. Here, the Commission says that the financial services law that Mr Bond has not complied with is s 1041A of the Act, headed Market manipulation. It provides:

"A person must not take part in, or carry out (whether directly or indirectly and whether in this jurisdiction or elsewhere):

(a) a transaction that has or is likely to have; or

(b) 2 or more transactions that have or are likely to have;

(c) creating an artificial price for trading in financial products on a financial market operated in this jurisdiction; or

(d) maintaining at a level that is artificial (whether or not it was previously artificial) a price for trading in financial products on a financial market operated in this jurisdiction."

1. There are two aspects to the Commission's case which, for simplicity, I shall describe as "market manipulation" and "future compliance".
2. The Commission's case on market manipulation is that Mr Bond, by executing the steps set out above "artificially raised the price of [Prime] shares from the proper and efficient market price that day". In that way, it was said, Mr Bond had taken part in a single transaction or two or more transactions that had, or were likely to have, the effect of creating an artificial price for trading in Prime. I should, at this juncture, observe that the Commission contended in paragraph 17(a) of its amended statement of facts and contentions that Mr Bond had "taken part" in a transaction or transactions; in paragraph 19 of its submissions dated 19 December 2008 it alleged that he "carried out" the transactions. I propose to consider the case as formulated in the amended statement of facts and contentions. Had Mr Bond taken part in such a transaction he would not have complied with a financial services law[6] and thus the discretion in s 920A of the Act would be enlivened.
3. As originally formulated[7], the Commission's case was that there were two or more transactions. In the course of the hearing Ms Conway, counsel for the Commission, foreshadowed an application for leave to amend the Commission's statement of facts and circumstances to plead, in the alternative, that there was only one transaction. A proposed amended statement of facts and contentions[8] was lodged after the hearing setting out this amendment and others sought by the Commission. This amendment, if allowed, would overcome part of an argument advanced by Mr Campbell SC, counsel for Mr Bond, that contended that "the transactions were in effect one transaction"[9].
4. I do not understand Mr Bond to oppose leave being granted to the Commission to amend its statement of facts and contentions in this way and thus I would grant leave. In any event, the changed case does not alter the factual basis on which the Commission advances its case; it merely applies an alternative legal label. It was not suggested, nor could it be, that Mr Bond would need to call any additional evidence to deal with the point.
5. There being no question that Prime shares were a financial product trading on a financial market in Australia, the issues that remain to be determined, so far as this aspect of the case is concerned, are (a), whether Mr Bond took part in the transaction, or transactions, and (b), whether the transaction or transactions had, or were likely to have, the effect of creating an artificial price for trading in Prime shares.
6. The first part of Mr Bond's case is that, as he was purchasing on behalf of Strategic's customers, there was no transaction or transactions that he took part in capable of enlivening s 1041A of the Act. Moreover, it was submitted, there could be no market manipulation unless there was an artificial price created and where, as here, there were genuine buyers and sellers, there could be no "artificial" price.
7. The future compliance aspect of the Commission's case is that Mr Bond would not comply with a financial services law[10]. I propose to read that as an allegation that there is reason to believe that that would be so, rather than the more certain prediction that would flow from a literal reading of the Commission's amended statement of facts and contentions. When read in that way, the allegation, if made good, would satisfy the jurisdictional fact required by s 920A(1)(f) of the Act, thereby enlivening the discretion to make a banning order.
8. The Commission sought to rely upon four matters from which this conclusion ought be drawn:
   • (a) that Mr Bond breached Strategic's conflicts of interest policy;
   • (b) that he "performed transactions that interfered with the basic forces of supply and demand working in an open and well-informed market in contravention of s 1041A of the Act";
   • (c) that he breached his duty to Strategic's customers to avoid a conflict of interests; and
   • (d) that the transactions were undertaken without the fully informed consent of Strategic's customers on whose behalf the prime shares were purchased.
9. The allegations in (a) and (b) have always formed part of the Commission's case but those in (c) and (d) (which were canvassed at the hearing before Mr Bond gave evidence and in the course of his evidence) are sought to be added post-hearing. Again, I do not understand Mr Bond to oppose leave being granted to make these amendments and I would accordingly do so. Mr Bond accepted that he had breached his duty to Strategic's customers and the allegation in paragraph (d) was put explicitly to him in the course of the hearing. There is no unfairness to him in permitting the Commission to change its case in this way.
10. For Mr Bond it is said that these matters do not provide reason to believe that Mr Bond would not comply with his obligations under the financial services law a fortiori where Strategic had undertaken to do its entire share trading through an independent broker in the future in order to avoid a similar situation arising in the future.

1. I can dispose of Mr Bond's first argument readily. It is said that Mr Bond did not take part in the transaction or transactions because the ultimate purchasers were the individual clients of Strategic. They were the contracting parties and they were personally liable, not Mr Bond. Thus, it is said, he did not take part in the transactions.
2. I do not accept the argument. It was he who, as agent for his clients, determined to purchase the shares and, in the same capacity, determined the price at which shares ought be purchased. He undertook the steps involved in each of the trades, including that which involved him accepting the offer, made by him as agent, to purchase his own shares. Given that the section looks to the effect, or likely effect, on the market it seems to me not to matter whether the actor is principal or agent, it is the person who is knowingly concerned in the steps in the transactions whose actions are caught by the section. Mr Bond was that person and I am satisfied that he took part in the transactions.
3. The more difficult question is whether the transactions had the effect of "creating an artificial price for trading" in Prime shares. The Commission's case is put on this basis in its final submissions:

"19. ... by placing a huge buy order in a thinly traded stock on the market and then increasing the buy price incrementally 21 times in the space of 5 minutes, pushing [Prime's] share price from .87c to over $1.00, the Applicant carried out transactions that had the effect of creating an artificial increase in the price of [Prime's] shares.

1. The fact that the Applicant had his sell order already on the market at the price of $1 renders his manipulative actions to increase the price of the share, actions that were also calculated to achieve a self-interested result."
2. It is not entirely clear what is intended to be conveyed by paragraph 20, however I observe that in cases such as the present, where an applicant's livelihood is at stake, the Commission ought distinctly allege (and prove) bad faith if it is to be relied upon. The Commission did not put its case on the footing that the series of transactions was a sham or a device to enable Mr Bond to dispose of his shares at $1.00 and thus avoid incurring the loss that would have been incurred by him had he sold his shares at the market prices prevailing at the time, or that the decision to purchase Prime shares for Strategic's clients was no more than a means to that end. The Commission did not attack the propriety of Mr Bond's judgment that Prime shares were a good investment at a price below $1.02, nor his decision to buy 2.5 m shares for Strategic's clients up to that price. Nor did it suggest that either decision was made other than bona fide. It seems to me that it is thus necessary, in considering this aspect of the case, to put to one side the fact that Mr Bond ended up selling his own shares. Thus the question posed by the Commission's case is whether Mr Bond's actions had the effect of creating an artificial price for Prime shares.
3. The researches of the parties have not revealed any case where the terms of s 1041A of the Act have been considered. The submissions for Mr Bond drew attention to the decision of the High Court in North v Marra Developments Limited[11] where the Court was concerned with s 70 of the Securities Industry Act 1970 (NSW). That section provided:

"A person shall not create or cause to be created or do anything which is calculated to create, a false or misleading appearance of active trading in any securities on any stock market in the State, or a false or misleading appearance with respect to the market for, or the price of, any securities."

Mason J (with whom all other members of the Court agreed on this point) said of this section:

"The relevant prohibition in the section is against creating, or causing to create, or doing anything which is calculated to create, 'a false or misleading appearance with respect to the market for, or the price of, any securities'.

In terms the statutory prohibition is directed against activity which is designed to give the market for securities or the price of securities a false or misleading appearance. In this setting, 'calculated' means 'designed' or 'intended' rather than 'adapted' or 'suited'. It is not altogether easy to translate the generality of this language into a specific prohibition against injurious activity, whilst at the same time leaving people free to engage in legitimate commercial activity which will have an effect on the market and on the price of securities. Purchases or sales are often made for indirect or collateral motives, in circumstances where the transactions will, to the knowledge of the participants, have an effect on the market for, or the price of, shares. Plainly enough it is not the object of the section to outlaw all such transactions.

It seems to me that the object of the section is to protect the market for securities against activities which will result in artificial or managed manipulation. The section seeks to ensure that the market reflects the forces of genuine supply and demand. By 'genuine supply and demand' I exclude buyers and sellers whose transactions are undertaken for the sole or primary purpose of setting or maintaining the market price. It is in the interests of the community that the market for securities should be real and genuine, free from manipulation. The section is a legislative measure designed to ensure such a market and it should be interpreted accordingly."

1. Whilst concerned with different language, much of what Mason J said is equally true of s 1041A of the present statute. It is not easy to translate the generality of the language into a specific prohibition whilst leaving people free to engage in legitimate transactions that will have an effect on the market and the prices in it. But, as it seems to me, the key to s 1041A of the Act is the existence of genuine buyers and genuine sellers. In common with the section under consideration in Marra Developments, s 1041A of the Act seeks to ensure that the market reflects the forces of genuine supply and demand.
2. What effect then did Mr Bond's transactions have on the market? It is the case that the price at which Prime shares were traded in the market went up from $0.89 to $1.01 in a short space of time and then returned to about $0.90. But despite that I do not consider that the effect of the transactions was to create an artificial price because the trades were made at prices, which, at the time, reflected the forces of genuine supply and genuine demand.
3. Mr Bond, on behalf of Strategic's customers, was a genuine buyer who was prepared to purchase up to 2.5 m shares at prices up to $1.02. The sellers were persons who had offered their shares for sale at prices ranging from $0.89 to $1.01. There is no reason to suppose that the sellers, including Mr Bond, were other than genuine in the sense that they had made a judgment about the prices at which they were willing to sell. There was nothing "artificial" about the prices paid merely because they happened to exceed the prices paid by other purchasers prior to, and after, the purchases by Mr Bond. At the times when Mr Bond made his purchases the value of Prime shares was that reflected by the prices offered and accepted. The value of Prime shares was the price that Mr Bond, a willing purchaser, was prepared to buy at, and the price at which willing sellers (including Mr Bond) were prepared to sell at. Thus the prices reflected fair market value[12].
4. The Commission relied upon evidence of Mr Russell McCrory, a retired stockbroker with vast experience in share trading but, with respect, it seems to me that much of what the Commission asked him to express an opinion on, misses the point. His evidence was that, ordinarily, to acquire a sizeable parcel of shares in a stock like Prime:

"... one would have to be prepared to be patient and execute the order over quite a few days, keeping a close watch on the trading screen and acquiring any shares that were offered at an acceptable price and also leaving a bid or bids for some shares at lower prices in case a seller offered stock at the best bid price."

"If for some reason the stock was required to be purchased much more urgently then one would have to bid the price up to a level where the required volume was seen to be available in the dealing screen."

1. That, as it seems to me, is precisely what Mr Bond did and accords with the view I have taken on the forces at work in the market as a consequence of Mr Bond's transactions. Mr Bond's judgment, which has not been criticized, was that it was necessary to undertake the purchase more urgently, in part because he had advance notice of a favourable report about the value of Prime shares and in part because, as Mr Bond said and as Mr McCrory accepted, market movements are scrutinized by "day traders" who might seek to take advantage of a large purchase order acquired in the "patient" manner suggested by Mr McCrory. Moreover, as Mr McCrory agreed, purchasing shares is not an exact science.
2. Thus I am not satisfied that Mr Bond's trading had the effect of creating an artificial price in Prime shares and, accordingly, I am unable to conclude that his actions breached s 1041A of the Act. That part of the Commission's case is not made out.

1. I have set out in paragraph [27] above the bases upon which the Commission contends that there is reason to believe that Mr Bond will not comply with the financial services laws in the future. That which alleges a contravention by him of s 1041A of the Act falls away given my earlier conclusion regarding market manipulation. The other allegations remain to be considered.
2. I am not particularly troubled by the allegation that Mr Bond breached Strategic's "conflicts of interest" policy. He certainly did so, but I am more concerned about the substance of his actions towards his clients than I am with a breach of a policy document.
3. The Commission puts its case on the basis that Mr Bond breached his duty to his clients to avoid a conflict of interest. That expresses the matter somewhat inelegantly. It might perhaps be better expressed by saying that Mr Bond's failing was that he preferred his personal interest over his duty to his clients, and, extraordinarily, he was not conscious at the time that there was anything wrong with what he was doing.
4. The Commission alleges as well that Mr Bond undertook the sale of his shares to his clients without their fully informed consent. That is undoubtedly made out. Moreover, he did not disclose to his clients that he was selling his own shares to them at a price considerably in excess of those that had been achieved on the open market for some time. These matters, compounded by Mr Bond's failure at the time to comprehend the vice of his actions, satisfy me that Mr Bond's conduct was discreditable and plainly breached his fiduciary duty. But the question is not whether Mr Bond's actions were discreditable or whether they breached his duty. It is whether these matters provide reason to believe that Mr Bond will not comply with financial services laws in the future.
5. The ambit of s 920A(1)(f) of the Act was considered by the Tribunal, then constituted by Deputy President Forgie and Member Hughes, in Re Howarth and Australian Securities and Investments Commission[13], where it was said[14]:

"Although perhaps trite to say so, what amounts to reasonable grounds will depend on the context. In this case, the immediate context is that of s 920A(1)(f) but the broader context is that of founding a power on which to make a banning order. As we will conclude later in these reasons, that is a power that is exercised on the basis of the protection of the public and not for the punishment of the person banned or to penalise that person. There is no doubt, though, that a consequence of a banning order is to prevent the person banned from undertaking work that person has chosen to do in the past. That may well be work that has provided the person's income and means of supporting him or her self and a family. That is a serious consequence for the person just as protecting the public is a weighty endeavour. These sorts of matters will be borne in mind in deciding whether there exist facts sufficient to induce in the mind of a reasonable person a reason to believe that the particular state of affairs exists.

In the case of s 920A(1)(f) that state of affairs is that the person 'will not comply with a financial services law'. The state of affairs is not the person 'may not comply with a financial services law'. To our minds, the distinction between what a person will do and what that person may do is very important. A state of mind in which a person has a reason to believe that another person may do something may well be reached before and on less convincing material than is required for a state of mind that the person will do something."

1. The Commission did not identify any particular provision of the Act (beyond s 1041A) but ordinarily it could not be expected to do so. The question may be more broadly stated by asking whether, having regard to Mr Bond's conduct in this instance, there is reason to believe that he would ignore or disregard the scheme established by the Act that regulates those who provide financial services, whether wilfully or through ignorance or incompetence. In some cases a pattern of past breaches may provide an affirmative answer; in some cases the gravity of a single episode may do so. But I do not consider that that conclusion can be reached in the present case.
2. Mr Bond's conduct in preferring his private interest is discreditable and does not reflect well on him. His failure to comprehend the vice of his actions is also worrying as it points to the possibility that Mr Bond has an inadequate understanding of what is required of him. These matters arguably raise a possibility of a breach of financial services law in the future but I am well short of being satisfied that Mr Bond will do so. Moreover one can be reasonably confident that Mr Bond will have gained a valuable insight about the need for regulatory compliance from these proceedings. Thus the second basis of the Commission's case is not made out.
3. I should add, for the sake of completeness, that had I reached an affirmative conclusion on this aspect of the case I would not have been deterred from making that finding by the undertaking offered by Mr Bond that Strategic would trade through an independent broker in the future. That undertaking would prevent the particular conduct engaged in in the present case but would not prevent other conduct that could amount to a breach of the statutory scheme.

1. In these circumstances neither of the bases relied upon by the Commission for the making of a banning order is made out. It follows that I would set aside the decision under review.

I certify that the 49 preceding paragraphs are a true copy of the reasons for the decision herein of Deputy President P E Hack SC

Signed: ....................Signed..............................................

Solicitors for the Respondent Australian Securities & Investments Commission

[1] Prime's securities exchange cipher was PRN and it is described that way in much of the material however for simplicity I shall refer to it as "Prime".

[4] The highest number traded in that period was 582,527 on 15 November 2007; the lowest, 100,490 on 6 November 2007.

[5] The Commission relies only on these paragraphs and does not suggest that any other paragraph is relevant.

[6] Section 1041A of the Act falls within the definition of this term in s 761A of the Act.

[8] Exhibit 8. The proposed amended statement of facts and contentions lodged on behalf of Mr Bond on 17 December 2008 will be Exhibit 9.

[11] [1981] HCA 68; (1981) 148 CLR 42 at 58-59.

[12] Spencer v The Commonwealth [1907] HCA 82; (1907) 5 CLR 418.

[13] [2008] AATA 278; (2008) 101 ALD 602.

[14] (2008) 101 ALD at 639-640, [135]-[136].