HIS HONOUR: Nigel Heath appears for sentence in respect of two offences contrary to the Corporations Act 2001. The first offence is referred to in short as "market manipulation". It is that between 16 February 2012 and 19 August 2013, at Sydney, he took part in or carried out 138 transactions involving financial products relating to Petsec Energy Limited that had the effect of creating an artificial price for trading in Petsec Energy Limited shares on the financial market operated in this jurisdiction, namely, the Australian Securities Exchange. Such an offence is contrary to s 1041A(c), and s 1311(1) of the Corporations Act 2001 (Cth) applies.
The second offence in short is creating a false and misleading appearance with respect to the price for trading in a financial product. It is that he between 2 July 2012 and 11 October 2013 at Sydney did acts, namely, carried out 30 transactions involving financial products relating to Petsec Energy Ltd, Leyshon Resources Ltd, Malagasy Minerals Ltd and Orca Energy Ltd that had the effect of creating or causing the creation of a false or misleading appearance with respect to the price of trading in Petsec Energy shares, Leyshon Resources shares, Malagasy Minerals shares and Orca Energy shares on the financial market operated in this jurisdiction, namely, the Australian Securities Exchange. Such an offence is contrary to s 1041B(1)(b) and s 1311(1) of the Corporations Act 2001 (Cth) applies.
In respect of each of the two offences, the maximum penalty provided is ten years imprisonment and/or a fine, the greater of $495,000 or 4,500 penalty unit, or three times the value of the benefits attributable to the commission of the offence.
On 20 January 2014, ASIC commenced an investigation into the offender's suspected contraventions of the Corporations Act. On 21 January 2014, he was served a notice under s 19 to attend on 31 January 2014 for examination, as permitted by the Australian Securities and Investments Commission Act 2001 (Cth). It was subsequently agreed between the offender and ASIC that the date would be postponed to Friday, 7 February 2014, and on that date he participated in an approximately two and a half hour examination pursuant to s 19. He made full and frank admissions about the offending, and on 4 April 2014 the offender's solicitor, Mr Mangioni of Watson Mangioni, corporate and commercial lawyers, contacted ASIC officers to discuss the matter and the possibility of the offender making formal admissions and pleading guilty to appropriate charges.
On 15 April 2014, Mr Mangioni indicated that the offender would co‑operate by admitting relevant matters and pleading guilty to appropriate charges. Between 15 April 2014 and 16 September 2014, Mr Mangioni, together with officers of ASIC, co‑authored what is referred to as a "Statement of Facts". On 16 September 2014, the offender adopted those facts.
On 17 September 2014 he was served with appropriate court attendance notices to appear in the Downing Centre Local Court on 14 October 2014, and on that date the matter was mentioned in the Local Court and he entered pleas of guilty. The co‑authored Statement of Facts is as follows:
Nigel Derek Heath is 51 years old.
Mr Heath has traded in shares in publicly listed companies for over 20 years from about 2002. Mr Heath commenced acquiring shares from 2012, also contracts for difference relating to shares ("CFD") in Petsec Energy Limited ("PSA"), an Australian company engaged in oil and gas exploration and production. Shares in PSA have traded on the Australian Stock Exchange ("ASX") since 1980. Mr Heath has been a long term accumulator of PSA shares.
Between 16 February 2012 and 19 August 2013 (approximately 18 months - "the First Relevant Period") Mr Heath, through nine separate online trading accounts, acquired larger volumes of shares and CFDs in PSA. As at 25 October 2012, Mr Heath's peak exposure in PSA exceeded five million shares (comprised of approximately 2.7 million PSA shares and approximately 2.3 million PSA CFDs) with an approximate market value of $673,386.
Between 2 July 2012 and 11 October 2013 (approximately 15 months -"the Second Relevant Period") Mr Heath also traded in shares or CFDs in Leyshon Resources Limited (LRL), Malagasy Minerals Limited (MGY) and Orca Energy Limited (OGY) (collectively, including PSA "the Relevant Securities").
Between 16 February 2012 and 11 October 2013 ("the Relevant Period") Mr Heath committed the following two offences ("the Offences") by engaging in trading shares and CFDs.
* During the first Relevant Period Mr Heath carried out 138 transactions of financial products relating to PSA shares on the ASX that had the effect of creating an artificial price for trading in the ordinary shares of PSA on the ASX, contrary to s 1041A(c) and 1311(1) of the Corporations Act 2001 (Cth) ("the Act") ("the Market Manipulation Offence") and
* During the second Relevant Period Mr Heath carried out 30 transactions of financial products relating to the relevant securities (primarily PSA) on the ASX that had the effect of creating a false or misleading appearance with respect to the price of trading in the relevant securities on the ASX, contrary to s 1041B(1)(b) and 1311(1) of the Act ("the Matched Trade Offence").
BACKGROUND
During the Relevant Period Mr Heath resided in New South Wales.
Mr Heath holds a Bachelor of Laws obtained from the University of Sydney in 1984 and a Master of Laws obtained from the University of Sydney in 1989.
Since 1993, Mr Heath has been self-employed as a share and CFD trader. Mr Heath has over 20 years trading experience, at some points in time trading almost every day.
During the Relevant Period Mr Heath held substantial investments in shares and CFDs. These investments included blue chip stocks as well as oil and gas stocks.
At the commencement of the Relevant Period, Mr Heath had (inter alia) a share and CFD portfolio worth approximately $1.4 million (with net equity of about $850,000) and a family home recently sold for $7.2 million (with net equity of about $4.7 million).
During the Relevant Period, trading in shares and CFDs (mainly securities other than the Relevant Securities) was Mr Heath's primary source of income.
Relevant Companies
The Relevant Securities are shares, or CFDs, in Australian companies with small market capitalisations that are principally involved in the exploration and production of natural resources.
Mr Heath's Trading Accounts
During the Relevant Period, Mr Heath transacted his trading through nine separate online trading accounts with two brokers. It is not asserted that these accounts were opened for any improper purpose. However, it is by reason of having these multiple accounts that the commission of the Offences was facilitated.
Each of the following trading accounts was used by Mr Heath to conduct transactions related to the Market Manipulation Offence and/or the Matched Trade Offence:
* Four were held in the names of various companies controlled by Mr Heath;
* Two were held in his own name;
* Two were held in the name of his wife, Mrs Elizabeth Heath (but operated exclusively by Mr Heath); and
* One was jointly held in his and Mrs Heath's name (operated exclusively by Mr Heath) (collectively, "Trading Accounts").
Details of Mr Heath's Trading Accounts are set out in a schedule.
There were five accounts with ETRADE Australia, three of which were established on 29 March 2001, being an account in his wife's name, an account in his name and an account in the name of Hales & Co Pty Ltd. There was a further account established on 22 February 2007 in the joint names of Mr Heath and his wife, and on 4 May 2007 a further account with ETRADE was established in the name of Karnies Investments Pty Ltd. Each of those five accounts was an equities‑type account.
There were four accounts established with First Prudential Markets Pty Ltd, one account in the offender's name established on 18 May 2012, a further account in his wife's name established two days later on 20 May 2012, an account in the name of Karnies Investments Pty Ltd established on 5 September 2012 and a further account in the name of Hales & Co Pty Ltd established on 14 January 2013. Each of the four accounts with First Prudential Markets was a CFD or Contract for Difference type account.
Contracts for Difference
A little under half of the transactions constituting the Market Manipulation Offence and the Matched Trade Offence involved trading in shares. The balance involved trading in CFDs.
CFD trading can multiply gains or losses arising from share price movements, in comparison to trading the underlying security, because the trading is usually leveraged. This means that CFD investors are required to pay a fraction of the value of the underlying security, but can obtain the benefit or detriment of changes in the price of the security. Accordingly, for the same amount of money, CFD investors can purchase a larger number of CFDs than underlying securities and can potentially make correspondingly large profits or losses from relatively small changes in price. CFD trading effectively magnifies profits or losses.
Margin Calls and Free Equity
Mr Heath traded CFDs through his four trading accounts held with First Prudential Markets Pty Ltd (FP Markets). FP Markets is an Australian financial services company that offers CFDs to its clients through a Direct Market Access Model ("DMA model"). Under its DMA model, FP Markets automatically hedged its exposure to any CFD position executed by a client, by taking an equivalent one‑for‑one position in the underlying shares. Mr Heath was able to see his CFD positions translate into an actual buy or sell order in the underlying shares on the ASX. This hedging mechanism can result in CFD trades having an immediate impact on the price of the underlying shares in the same way as trading in shares directly.
FP Markets required Mr Heath, as a CFD client, to make an initial cash deposit or to have funds available in his account at the time of entering into a CFD, which is referred to as a "Margin".
The amount of free funds available for a client to enter into new CFD positions, withdraw funds from the account, and/or absorb any Margin Calls made on the account is referred to as "Free Equity". Mr Heath was able to view, at all relevant times, the amount of Free Equity in each of his CFD Trading Accounts with FP Markets. If Mr Heath's Free Equity fell below a specified value, FP Markets could require additional funds to be deposited into his account or could require him to reduce his CFD positions ("Margin Call").
FP Markets continuously calculated the client's Free Equity in each CFD Trading Account by calculating the difference between the share prices of the underlying shares at the time the contracts were created and until each contract was closed out. For example, when Mr Heath entered into a long position, if the price of the underlying shares increased on the ASX, Mr Heath's Free Equity immediately rose. Conversely, if the price of the underlying shares fell, the Free Equity simultaneously fell and, depending on his overall Free Equity in a particular CFD Trading Account, Mr Heath would be at risk of receiving a Margin Call. Therefore, the prevailing market price of the underlying shares was directly related to Mr Heath's Free Equity.
During the Relevant Period Mr Heath held large volumes of shares and CFDs in PSA with his peak exposure exceeding five million shares (comprised of approximately 2.7 million PSA shares and approximately 2.3 million PSA CFDs). Accordingly, the share price of PSA was central to Mr Heath maintaining Free Equity. The higher the PSA share price, the more Free Equity that was available to Mr Heath, which reduced the likelihood of Margin Calls and allowed Mr Heath to enter into new CFDs. During the Second Relevant Period, Mr Heath received a number of Margin Calls due to falls in the PSA share price, reducing his Free Equity.
Mr Heath entered into the transactions relevant to the Market Manipulation Offence and the Matched Trade Offence for the sole or dominant purpose of maintaining or increasing the share price for the Relevant Securities. Such an outcome personally advantaged Mr Heath by allowing him to:
* Avoid Margin Calls;
* Avoid having to contribute more funds to his CFD Trading Accounts; and/or
* Increase the Free Equity in his CFD Trading Accounts which he could use to trade in shares or maintain or take other CFD positions.
Mr Heath's stated purpose for carrying out the trading constituting the Market Manipulation Offence and the Matched Trade Offence was to provide price support for the relevant securities (in particular, PSA) and to minimise or avoid Margin Calls.
Since 2002, Mr Heath has been an accumulator of PSA shares. During the Relevant Period (a period of 20 months) Mr Heath's total PSA shareholding increased month on month (with the exception of a small decline in one month only). Mr Heath considered himself something of a "champion" for PSA as a stock. This was Mr Heath's main motivation for providing price support for PSA across the Relevant Period.
THE MARKET MANIPULATION OFFENCE
During the First Relevant Period, Mr Heath, contrary to s 1041A(c) of the Act, carried out 138 separate transactions of financial products relating to PSA shares on the ASX that had the effect of creating an artificial price for trading in the ordinary shares of PSA on the ASX ("the 138 Transactions"). In particular, each of the 138 Transactions, the details of which are set out in Sch 1 which will be attached to these reasons, was carried out by Mr Heath for the sole or dominant purpose of maintaining or increasing the price of PSA shares on the ASX.
Through the 138 Transactions, Mr Heath caused the price of PSA shares on the ASX to rise:
* On four occasions by 1.5 cents, representing increases of between 7.9% and 10.3% of the PSA share price;
* On 65 occasions by one cent, representing increases of between 4.4% and 11.5% of the PSA share price; and
* On 69 occasions by 0.5 cents, representing increases of between 4% and 5% of the PSA share price.
As identified in Sch 1, the 138 Transactions had the following features:
* The volume of shares traded on each occasion was relatively small, ranging from five to 50,000 with an average of 3,221;
* The value of the shares traded on each occasion was relatively low, ranging from $1 to $8,750 with an average of $496;
* Each transaction caused an increase in the PSA share price ranging from 4% to 11.5% with an average of 5.6%;
* Most (but not all) of the transactions resulted in an increase of Mr Heath's Free Equity, ranging from $40 to $9,437 with an average of $3,386; and
* Each transaction resulted in an increase in the market value of Mr Heath's PSA holding, ranging from $15,878 to $46,928, with an average of $24,009.
As these figures illustrate in respect of the 138 Transactions, Mr Heath purchased small volumes of PSA shares or CFDs with an average value of $496 in such a way that they caused an average increase in his Free Equity by more than six times that amount, namely $3,386. Further, the 138 Transactions caused an average increase in the market value of his PSA holding by more than 48 times the average value of the transaction.
Mr Heath undertook each of the 138 Transactions for the sole or dominant purpose of maintaining or increasing the price of PSA shares on the ASX for the reasons identified in paras 23 and 24 above, and having the effect identified in para 22 above. The increase in price was achieved by Mr Heath through the following methods of manipulating trading (as identified in the column headed "Market Manipulation Method" in the table at Sch 1).
First Method - Price Support
In relation to 123 of the 138 Transactions, Mr Heath purchased PSA CFDs or PSA shares to maintain or increase the price of PSA shares. On many occasions Mr Heath acted swiftly in response to a fall in the price of PSA shares. Mr Heath's intention in carrying out these 123 Transactions was to restore the price of PSA shares to its previous level or higher. For example, on 24 July 2013,
* At 10:43:12 am, the price of PSA shares was 12.5 cents.
* At 10:57:25 am, Mr Heath entered an order to buy 1,000 PSA CFDs at 13 cents (equating to $130). This CFD purchase, entered through FP Markets' DMA model, caused an order to buy 1,000 PSA shares at 13 cents to be entered onto the ASX. This order traded immediately, resulting in a price increase in PSA shares from 12.5 cents to 13 cents (or 4%).
* Immediately after that trade the price of PSA shares fell to 12 cents due to trades executed by persons other than Mr Heath.
* At 11:37:42 am, Mr Heath entered an order to buy 1,000 PSA CFDs at 12.5 cents (equating to $125). This CFD purchase caused an order to buy 1,000 PSA shares at 12.5 cents to be entered onto the ASX, which traded immediately, resulting in a second price increase in PSA shares from 12 cents to 12.5 cents (or 4.2%).
* Immediately after that trade the price of PSA shares fell again to 12 cents due to trades executed by persons other than Mr Heath.
* At 11:44:52 am, Mr Heath entered an order to buy 500 PSA CFDs at 12.5 cents (equating to $63). This CFD purchase caused an order to buy 500 PSA shares at 12.5 cents to be entered onto the ASX, which traded immediately resulting in a third price increase in PSA shares from 12 cents to 12.5 cents (or 4.2%).
* At 11:45:52 am, one minute later, Mr Heath entered an order to buy 500 PSA CFDs at 13 cents (equating to $65). This CFD purchase caused an order to buy 500 PSA shares at 13 cents to be entered onto the ASX, which traded immediately, resulting in a fourth price increase in PSA Tshares from 12.5 cents to 13 cents (or 4%).
* At 1:04:17 pm, the price of PSA shares fell to 12.5 cents due to trades executed by persons other than Mr Heath.
* At 1:05:00 pm, Mr Heath entered an order to buy 1,200 PSA CFDs at 13 cents (equating to $156). This CFD purchase caused an order to buy $1,200 PSA shares at 13 cents to be entered onto the ASX, which traded immediately, resulting in a fifth price increase in PSA shares from 12.5 cents to 13 cents (or 4%).
* At 2:12:35 pm, the price of PSA shares fell to 12 cents due to trades executed by persons other than Mr Heath.
* At 3.06.34pm, Mr Heath entered an order to buy 1,150 PSA CFDs at 12.5 cents (equating to $144). This CFD purchase caused an order to buy 1,150 PSA shares at 12.5 cents to be entered onto the ASX which traded immediately, resulting in a sixth price increase in PSA shares from 12 cents to 12.5 cents (or 4.2%):
* The combined value of the above transaction was $683.
The above example does not show all trading in PSA shares and CFDs of 24 July 2013. It is included to illustrate a particularly obvious serious example of the Market Manipulation Offence.
Second Method - Marking the Close
In relation to 15 of the 138 Transactions, Mr Heath purchased PSA CFDs or PSA shares late in the trading day in order to raise the reported closing price. This practise is known as "Marking the Close". For example, on 14 August 2013:
* From the time the ASX opened for trading until 4.10pm, the price appears that shares traded between 10 cents and 11 cents. At 4.10pm, the last traded price was 10 cents, and this appeared to be the likely closing price of PSA shares on 14 August 2013.
* However, at 4.10.32pm, Mr Heath entered an order to buy 2,500 PSA CFDs at 11 cents. This CFD purchase caused an order to buy 2,500 PSA shares at 11 cents to be placed onto the ASX, which traded immediately, and resulted in the share price increasing from 10 cents to 11 cents. This was the final trade of the day.
* Mr Heath's CFD purchase resulted in the price of PSA shares closing at a price of 1 cent or 10% higher than its previous price.
* The value of this transaction was $275 but it resulted in a $32,704 increase in the market value of Mr Heath's PSA holding, and a $7,592 increase in Mr Heath's Free Equity.
THE MATCHED TRADE OFFENCE
During the Second Relevant Period, Mr Heath, contrary to s 1041B(1)(b) of the Act, carried out 30 transactions of financial products relating to the Relevant Securities on the ASX that had the effect of creating a false or misleading appearance with respect to the price of trading in the Relevant Securities on the ASX ("30 Transactions"), in particular, in respect of each of the 30 Transactions (the details of which are set out in Sch 2):
* Mr Heath effectively controlled or caused both the buy and sell side of the transaction (commonly referred to as "Matched Orders"), and
* Mr Heath carried out the transaction for the dominant purpose of increasing or maintaining the price of the Relevant Securities on the ASX.
Twenty-five of the 30 Transactions involved PSA shares and had the following features:
* The volume of shares traded on each occasion was relatively small, ranging from 200 to 60,000 with an average of 10,143;
* The value of the shares traded on each occasion was relatively low, ranging from $25 to $5,940 with an average of $1,210;
* Each transaction caused an increase in the PSA share price, ranging from 3.1% to 6.9% with an average of 3.9%; and
* Most (but not all) of the transactions resulted in an increase in Mr Heath's Free Equity, ranging from $128 to $4,112 with an average of $1,842.
* Each transaction resulted in an increase in the market value of his overall holdings, ranging from $2,650 to $27,106 with an average of $13,420.
Two of the 30 Transactions involved LRL shares and had the following features:
* The volume of shares traded was 30,000 and 100,000 respectively;
* The value of the shares traded was $4,650 and $14,500 respectively;
* These transactions caused an increase in the LRL share price of 3.3% and 3.6% respectively; and
* These transactions caused an increase in the market value of Mr Heath's overall holding by $1,717.
One of the 30 Transactions involved MGY shares and had the following features:
* The volume of shares traded was 25,000;
* The value of the shares traded was $1,875;
* This transaction caused an increase in the MGY share price of 4.2%; and
* This transaction caused an increase in the market value of Mr Heath's overall holding of shares by $625.
Two of the 30 Transactions involved OGY shares and had the following features:
* The volume of shares traded was 20,000 and 299,500 respectively;
* The value of the shares traded was $580 and $8,386 respectively;
* These transactions caused an increase in the OGY share price of 3.6% and 3.7% respectively; and
* These transactions caused an increase in the market value of Mr Heath's overall holding by $2,857.
Mr Heath undertook each of the 30 Transactions, effectively controlling or causing both the buy and sell sides with the intention of creating a false or misleading appearance with respect to the price of trading in the Relevant Securities on the ASX for reasons identified in paras 23 and 24 above, and having the effect identified in para 22 above.
Examples of trades constituting the Matched Trade Offence are set out below:
Example 1 - Matched Trades on 19 June 2013:
On 19 June 2013:
* At 2.12.31pm, the price of PSA shares was 12 cents.
* At 2.28.31pm, Mr Heath entered an order through his FP Markets Trading Account, Karnies Investments Pty Limited, to sell 394 PSA CFDs at 12.5 cents. This CFD sale caused an order to sell 394 PSA shares at 12.5 cents to be entered onto the ASX.
* At 2.28.33pm, Mr Heath entered an order through his ETRADE Trading Account, Elizabeth Heath, to buy 394 PSA shares at 12.5 cents which traded immediately with the above sell order.
* This first Matched Trade which had a value of $49.25 caused an increase in the PSA share price from 12 cents to 12.5 cents or 4.2%. This caused the market value of Mr Heath's PSA holding to increase by $13,551 and resulted in his Free Equity increasing by $3,482.
* At 3.34.04pm, the price of PSA shares fell to 12 cents due to a trade executed by persons other than Mr Heath.
* At 3.44.32pm, Mr Heath entered an order through his FP Markets Trading Account, Derek Heath, to sell 200 PSA CFDs at 12.5 cents. This CFD sale caused an order to sell 200 PSA shares at 12.5 cents to be added onto the ASX.
* At 3.44.32pm, Mr Heath entered an order through his ETRADE Trading Account, Elizabeth Heath, to buy 200 PSA shares at 12.5 cents which traded immediately with the sell order.
* This second Matched Trade which had a value of $25 caused an increase in the PSA share price from 12 cents to 12.5 cents or 4.2%. This caused the market value of Mr Heath's PSA holding to increase by $13,551 and resulted in his Free Equity increasing by $3,466.
Example 2 - Matched Trades on 12 April 2013:
On 12 April 2013:
* At 1.00.00pm, the price of OGY shares was 2.7 cents.
* At 1.43.22pm, Mr Heath entered an order through his ETRADE Trading Account, Elizabeth Heath, to buy 320,000 OGY shares at 2.8 cents.
* At 1.43.28pm, Mr Heath entered an order through his FP Markets Trading Account, Hales & Co Pty Ltd, to sell 299,500 OGY CFDs at 2.8 cents. This CFD sell caused an order to sell 299,500 OGY shares at 2.8 cents to be entered onto the ASX. This first Matched Trade, which had a value of $8,386, caused an increase in the OGY share price from 2.7 to 2.8 cents, or 3.7%. This caused the market value of Mr Heath's OGY holding to increase by $476.
* At 1.36.54pm, Mr Heath entered an order through his FP Markets Trading Account, Hales & Co Pty Ltd, to sell 20,000 OGY CFDs at 2.9 cents. This CFD sale caused an order to sell 20,000 OGY shares at 2.9 cents to be entered into the ASX.
* At 1.44.01pm, Mr Heath entered an order through his ETRADE Trading Account, Elizabeth Heath, to buy 20,500 OGY shares at 2.9 cents, of which 20,000 shares traded immediately with the above sell order.
* The second Matched Trade, which had a value of $580, caused an increase in the OGY share price from 2.8 cents to 2.9 cents or 3.6%. This caused the market value of Mr Heath's OGY holding to increase by $2,381.
MR HEATH'S KNOWLEDGE OF PROHIBITIONS AGAINST MARKET MANIPULATION AND MATCHED ORDERS
Through the Relevant Period, Mr Heath knew or should have known of the prohibitions against Market Manipulation and Matched Orders. For example, on opening the four FP Markets Trading Accounts on 18 May 2012, 20 May 2012, 5 September 2012 and 14 January 2013, he acknowledged that he had received, read, understood and agreed to FP Markets terms and conditions.
The FP Markets terms and conditions included the following:
"2.14. You must not instruct us to submit an order to enter into a transaction which would breach or cause us or any other person to breach the Corporations Act, the rules or any other applicable laws including, without limitation, any law or the rules in relation to:
(a) market manipulation, false trading, market rigging, fictitious transactions, washed trading or matching of orders;
(b) insider trading;
(c) short selling;
(d) creating a disorderly market or otherwise prejudicing the integrity or efficiency of the market; ..."
"3.17. Market conduct. All market participants (including FP Markets) have a legal obligation to ensure that the markets are fair, orderly and transparent. FP Markets' clients should be aware that some practices in placing orders can constitute market manipulation or creating a false market which is conduct prohibited under the Corporations Act. It is the client's responsibility to be aware of unacceptable market practices and the legal implications. The client may be liable for penalties to regulators such as ASIC or be liable to FP Markets for costs to FP Markets arising out of those trading practices of the client which lead to the client, FP Markets or any other person suffering loss or penalty."
CO-OPERATION
Mr Heath has cooperated with ASIC in relation to its investigation of the offences as outlined in the statement of David Jensen.
It is convenient at this point to turn to the statement of the witness David Jensen as to co-operation. I have already referred to the sequence of events from the commencement of the investigation to the entering of the pleas of guilty on 14 October 2014 in relation to each of the two offences. David Jensen is a lawyer employed by the Australian Securities Investment Commission in its Market Integrity Enforcement Division, and was authorised to make the statement part of Exhibit 1. In Mr Jensen's opinion, the offender demonstrated a willingness to facilitate the course of justice by his full co-operation from the outset. It was Mr Jensen's opinion that evidence obtained by ASIC without the offender's co-operation was capable of sustaining a conviction of the offender:
"Nevertheless, the co-operation provided by him in relation to the offences has been of significant practical value to ASIC. Without the offender's co-operation ASIC would have been required to expend additional substantial time and resources in seeking to gather admissible evidence capable of proving the offences and preparing a full brief of evidence..."
"The aforementioned co-operation provided by the offender, including co-operation provided in his s 19 examination in settling and agreeing to the Statement of Facts and admitting and pleading at the first available opportunity to the offences, has enabled this matter to be resolved much earlier than would have otherwise been the case and freed up the resources which ASIC has been able to utilise for other investigations."
I note in respect of co-operation that the detection of offences such as these is generally difficult. However where the offending conduct, or suspected offending conduct, has been detected, all of the relevant transactions and the parties or accounts responsible for the transactions are the subject of public record. That is, while they may be difficult to detect, once detected, they are, as a general proposition, not difficult to acquire the relevant evidence in respect of. Nonetheless, the offender's co-operation has significantly assisted ASIC to resolve the matter in an expeditious and certainly less costly manner. The offender is entitled to the full benefit of any discount which might be provided for his facilitation of the course of justice and such a discount will be provided in full.
His co-operation is also relevant to the issue of contrition, and I accept that he is contrite in relation to his offending conduct. Nonetheless, offences such as these are serious offences.
Mason J, with whom other members of the High Court agreed, in North v Marra Developments Ltd (1981) 148 CLR 42 at 59 in relation to the Securities Industry Act 1970 s 70 (a predecessor to s 1041B) provided the leading judicial exposition of offences contrary to s 1041B, such comments being also relevant to s 1041A. His Honour said,
"It seems to me that the object of the section is to protect the market for securities against activities that would 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 should be interpreted accordingly.
I agree...in rejecting the suggestion that the section strikes only at fictitious or colourable transactions. Transactions which are real and genuine but only in the sense that they are intended to operate according to their terms, like fictitious or colourable transactions, are capable of creating quite a false or misleading impression as to the market or the price. This is because they would not have been entered into but for the object on the part of the buyer or of the seller of setting and maintaining the price, yet in the absence of revelation of their true character they are seen as transactions reflecting genuine supply and demand and having such an impact on the market.
When purchases have been made of shares in a company at or about a particular level for the purpose of setting and maintaining a market price for those shares there is a breach of the statutory prohibition. At the very least purchases have then been made which are calculated to create 'a false or misleading appearance with respect to the market for, or the price of' the shares. In reality the purchases are calculated to create a false market or false price. The false or misleading appearance is that the market, in the absence of any disclosure that a market support operation is on foot, appears to be real or genuine, there being no overt sign of market support or manipulation.
In passing I note that it is enough to breach the section that the activities are calculated to create a false or misleading appearance. It is not necessary that they do in fact create that appearance."
In R v JM (2013) 87 ALJR 836 at 46-48 the High Court approved the principles from North v Marra,
"If a transaction is made for the sole or dominant purpose of setting or maintaining a price of listed shares, it is not necessary to proffer some additional proof that the impugned transactions 'went on to affect the behaviour of genuine buyers and sellers in the market' in order to demonstrate that the transactions had, or were likely to have, the effect of creating or maintaining an artificial price. On‑market transactions on the ASX (like the impugned transactions in this case) are made openly. Participants in the market can be (and are) informed of the transactions which occur. Participants in the markets are entitled to assume that the transactions which are made are made between genuine buyers and sellers and are not made for the purpose of setting or maintaining a particular price. Hence, as Mason J explained in North v Marra, "in the absence of revelation of their true character [as transactions to set or maintain a particular price] they are seen as transactions reflecting genuine supply and demand and having such an impact on the market'. They have, or at least are likely to have, the effect of setting or maintaining an artificial price for the shares in question."
In respect of subjective matters, the Court has before it a number of affidavits, reports and references.
The offender is now 52 years of age. He is married and there are two daughters of the marriage, one currently doing her second year at the Victorian College of Arts ("VCA") and the youngest daughter currently embarking on or about to embark on her final year of high school in Sydney: that is, the Higher School Certificate year. Their eldest daughter was born in 1995 and is some 19 years of age, and their second daughter was born in 1998 and is approximately 16 years of age.
There are two affidavits from the offender's wife, Elizabeth Heath, dated 11 May 2015 and 25 August 2015. Mrs Heath indicates that she first met the offender when he was employed as a solicitor at the firm of Turner Freeman Lawyers; he was then practising primarily in criminal law. In 1990, she and the offender married. In approximately 1993/1994, the offender decided to cease practise as a lawyer and follow in the footsteps of his godfather, Harry Hales, and become a self‑trader on the stock market.
Mrs Heath's affidavit sets out in excessive detail the personal and family history. I will refer to only parts of the material but that does not mean that I have not read the whole of the material, nor does it mean that I have not taken it into consideration where relevant. In particular, she refers to her daughter Jessica as having been affected by depression since approximately the age of 15, and subsequently in 2011 being diagnosed with an eating disorder, requiring since that time consultation with the appropriate experts such as psychologists, and treatment, that being consultations with the Department of Adolescent Medicine, Eating Disorder Unit at Westmead, and by December 2011 Dr Basten indicated that in his opinion there was a consensus that Jessica was suffering from anorexia nervosa. Her problems continued and in 2012 her condition worsened, she was then suffering from bouts of depression and anxiety and had developed a severe form of bulimia. By the end of 2012 Jessica was consulting Dr Mark Rowe, a psychiatrist, in relation to her ongoing problems. During her final Year 12 she was receiving medication in relation to depression. Her problems continued.
She successfully completed the Higher School Certificate with a good result and in early 2014 she commenced study at the Victorian College of Art, which required her to move to Melbourne. Because of her ongoing health problems, Mr and Mrs Heath had alternatively from time to time provided support to her by travelling to Melbourne to spend time to assist her.
Her problems have however continued. She completed her first year and returned again to Melbourne, or continued in Melbourne to commence her second year in February of this year. Mr and Mrs Heath have visited her on a regular basis again this year to assist her. There appears to have been some improvement in her condition over the course of the year, although she still has difficulties. Mrs Heath is of the opinion that her daughter Jessica needs ongoing support as has been provided in the past, that is, the attendance by either herself and/or her husband from time to time in Melbourne while she studies.
She also refers to her husband as being well read and highly intelligent, kind, caring, selfless, and an extraordinary person, as well as, in her opinion, a very moral and ethical person. She speaks about his support for his daughters and particularly Jessica, and also his philanthropy, having initiated and implemented an indigenous scholarship program at PLC, where he, together with the council, commenced such a program, and he made a substantial contribution to it, providing some $100,000 to commence it. He was invited to join the PLC council and was appointed Chief Financial Officer of the council, although he has not held that position for some time.
Mrs Heath's second affidavit relates to her continuing concern, particularly for her daughter Jessica, who by the time of the affidavit had commenced the second semester of her second year at VCA. In it she indicates that although it had been her original intention that either Mr Heath or herself would reside for the first six months of 2015 with Jessica in Melbourne on a rotating basis, that had not happened because her daughter had wanted to live with a roommate. She holds fears in relation to her daughter's ability to complete the VCA course without a high level of support from at least one of herself or Mr Heath being able to reside in Melbourne.
There is a report from Dr Mark Rowe, psychiatrist, dated 6 March 2015 in which he opines,
"It is unpredictable as to the exact impact that both conversation with her father, less frequently together with her mother, not visiting her regularly and at will may have upon Jessica's mental and physical health. It is my opinion however that it is likely that Jessica may get into 'ruts' with both her eating disorder and mood disorder, which may become more entrenched and then impact significantly upon her studies as well as her health."
I note that his opinion is one of a somewhat hypothetical nature, attempting to predict the future, and that he expresses it as a possibility that there will be some deterioration. He further states in his report that "Jessica appears to be coping very well at this current stage…"
He was obviously asked to address the likely effect that any custodial sentence might have on Jessica. He said, "While this is speculative, based on my knowledge of Jessica's coping mechanisms and previous reactions to the significant psychosocial stresses, it is my opinion that she is likely to develop anxiety." Although he opines that it is possible that this stress would result in a depressive relapse, causing the development of certain urges referred to in his report, he says, "I believe she has matured to a degree with her coping mechanisms since suffering with these issues back in middle high school." He further states,
"The impact of any exacerbation of both her eating disorder and mood disorder is a real risk that she may develop worsening lethargy, poorer self-care, social withdrawal and negative self-worth, which is likely to result in her not attending or partly attending her college, with the reasonable possibility of not correcting her failing or having to cease her studies altogether."
Dr Rowe has speculated that the offender's daughter is likely to develop anxiety and may become depressed should her father receive a term of imprisonment. I accept that that is a possibility, but I do not accept as submitted on behalf of the offender that it is an exceptional circumstance that would lead the Court to impose anything other than a full time custodial sentence if such a sentence is appropriate.
The offender's wife will be available to provide ongoing support to their daughter, and the doctor's opinion is, as I said, a speculative one. I have little doubt that their daughter's difficulties can be accommodated by appropriate management which would not require the offender to be at liberty, whether that be by longer periods of assistance by Mrs Heath or other persons during the time that Jessica remains studying in the near future at the Victorian College of Arts. I note of course that in the earlier part of this year, Jessica has determined that she wished to live separately and presumably with some other student or students in Victoria despite her ongoing problems.
The offender has no previous criminal history. A number of references have been tendered on his behalf. Desmond Thompson, a stockbroker from 1988 to his retirement in 2011, refers to the offender as having been a client of his from the year 2000 until 2011. He states that he finds the nature of the offences inconsistent with Mr Heath's integrity of character and his respect for the importance of the public confidence in the Australian Stock Market. He also states that the offence is completely inconsistent with any instructions Mr Heath gave him during their 11 year relationship. Of course, these offences relate to a period after such relationship. He also refers to the offender as being embarrassed and remorseful, and feeling deep shame and anxiety.
The offender's brother, Lieutenant Colonel Julian Heath, being an older brother, also refers to the offender's personal history and family history. He clearly holds the offender in high regard and refers to the offender as having a passion for the challenge of share trading. He states that he was contacted on the day that the offender was informed of the ASIC investigation and that he suggested his brother seek legal advice but responded, "I was not aware that I had committed an offence and I am intending to co-operate to the fullest extent possible."
Lieutenant Colonel Heath, who is now the Chief Operating Officer for a global business risk consultancy specialising in political, integrity and security risk, offers the opinion that his brother's offence was as a result of "an act of ignorance."
There is a further reference from a Mr Nish Patel, dated 29 April 2015, he being the General Manager, Finance and Strategy, of the SAS Trustee Corporation (NSW State Super). He states that he has known the offender for some 24 years and that their families are close. He first met the offender when they were colleagues at HFC Financial Services Limited in 1991. He states of the offender, "as a lawyer at HFC Financial Services Derek was highly respected for his sound advice and integrity". He goes on to speak of the offender's family being his first priority, and clearly holds the offender in good regard. He states that when the offender first informed him of his situation he was "distraught and upset" that his actions may result in criminal proceedings. "As a lawyer, husband, father and an active member of his local community this was deeply distressing and reputationally ruinous".
He also states that the offender has indicated that "he is contrite and repentant of his regrettable actions" on numerous occasions.
There is a further reference from Noel Souness, dated 30 April 2015, an assistant director with the Economic Regulation Authority of Western Australia. He refers to the offender, who he has known since 1998, as being, "one of the kindest, most intelligent, hardest working and most ethical men I have ever worked with".
He appears to be of the opinion that the offender's conduct was because he became "very attached" to stocks which had become his personal favourites and that he was obsessive in that regard. He otherwise thinks well of the offender although his contact has been limited in most recent years.
There is further a reference from a Mr Adrian Boddy, dated 30 March 2015. He is a retired academic, having formally been the Director of the Architecture Program at UTS and he speaks particularly of the offender's personal support for him when he was diagnosed with prostate cancer and also refers, as do a number of others, to his advocacy for indigenous rights in Australia and the scholarship at PLC Pymble. He refers to him as being "an exemplary father".
I have no doubt that all of the references that have been made by those persons about the character of the offender are genuinely held by those persons, and it is appropriate to regard the offender, with the exception of his conduct over this 20 month period, as otherwise being a person of good character.
It is common in relation to matters such as this, involving share or CFD trading, that the offences are committed by persons who hold high positions in the community, whether that be in a private or public capacity, who are highly regarded by those who know them, who love and care for their family and have provided benefits to the community. Those who indulge in this type of conduct are frequently persons of such character who also have the means and the talents to commit offences of this nature. Persons who are not well off financially are of course not in the position to commit offences such as this.
In Khoo v R [2013] NSWCCA 323 the New South Wales Court of Criminal Appeal endorsed a statement of principle made in relation to the offence of insider trading as provided by s 1043A of the Corporations Act but which is nonetheless applicable to market manipulation offences, which are similar in nature and carry the same maximum penalty. The Court said,
"The acquisition or disposal of financial products by people having the unfair advantage of inside information is criminalised because it has the capacity to unravel the public trust which is critical to the viability of the market. It is, as previously observed by this Court, a form of cheating. The fact that people of otherwise good character and compelling personal circumstances attempt to engage in such conduct emphasises the need for the clear deterrent that insider traders should expect to go to gaol."
The final sentence of that quote is a statement of principle which is just as applicable to this matter as it is to insider trading.
The offender provided an affidavit, which was tendered without objection, in relation to which there are a number of matters, some of which I have referred to, but at the risk of repetition, I note that he was born in Bourke. He attended primary school in Bourke and Charleville, Queensland. His parents eventually moved to Sydney and he attended St Joseph's College, completing his Higher School certificate there. He obtained a Bachelor of Laws degree at Sydney University in 1980. His mother passed away, suffering from depression and anorexia for a significant period of time, apparently shortly after he commenced his university studies. He graduated in 1984. His father at about that time suffered from two significant strokes and the offender became his primary carer from about the age of 23 until he married in 1990. After university he attended the College of Law. His first job was in 1985 at Turner Freeman where he practised primarily in Torts and criminal law.
In 1989 he obtained his Master of Laws from Sydney University. He then commenced work with a commercial law firm, JR Gibbs, where he was primarily involved in commercial and leasing work for some two years. In 1991 his father passed away, and he then became employed at HFC Financial Services where he remained for approximately two years. His interest in share trading arose from essentially his relationship with his godfather, Perry Hales, whose company he inherited in 1993 when Mr Hales passed away. It is at that time approximately that he decided to turn from continuing to practice as a lawyer to supporting himself and his family by share trading.
There are a number of passages in Mr Heath's affidavit which caused me some concern despite the fact that he was not required for cross-examination on his affidavit. They are such statements as follows,
"In the 1990s I attended courses relating to futures and options trading. I recall that the courses were focused on the mechanics of how to trade futures and options. I do not recall there being any component of the courses which related to potential unlawful conduct while trading".
In about 2007, trading in contracts for difference became available,
"...I continued to educate myself in respect of share trading, for example by attending courses. Those courses were primarily focused on the available share trading products (like CFDs). I do not recall any of the courses including a component on legal matters."
…
"The opening of each FP market's account was a box ticking exercise". There was a five minute "test" which was required to be completed prior to opening each FP market's account. The majority of the test involves verification of my identity and the process of leaking each FP market's account to my bank account. There was no question in the test which related to my understanding of the relevant calls, the regulations relating to trading".
Despite those statements, the offender however did say,
"While I was not specifically aware of the market manipulation or washing provisions of the Corporations Act I have generally been aware of matters such as insider trading and market manipulation for over 20 years. However after 20 years in the market I should have been far more aware of what would trigger those provisions. My somewhat naïve view was simply that market manipulation or ramping as I knew it involved driving up the price of stock and then selling into that price increase. I never did that."
…
"At the time of the trading constituting the present offences I did not know that my actions were breaking the law."
…
" I should have known that the provisions against market manipulation and matched orders by reason of (at least) FP Markets, terms and conditions. However I did not. I accept though that I should have thought far more about the regulatory aspect of my trading".
In respect of the Market Manipulation Offence he stated,
"It was always about championing the stock against a flagging market."
…
"In hindsight my actions were silly in the extreme, as I knew then and I know now that all shares rise and fall and you wait it out until the market sees a stock's intrinsic value or you sell."
…
"I wanted some form of validation that I was right in supporting this stock. Ego and competitiveness (me against the rest of the market) was definitely an issue for me in this trading."
…
"I traded in my home office and I did not have any interaction with anyone about what I was doing. I did not gain perspective from any external parties like colleagues or stockbrokers, nor did I seek advice from old broker friends which might have illuminated how futile and stupid my actions were as well as expensive over time."
…
"At the time of the trades, I genuinely felt that I was simply supporting a stock that I wholeheartedly believed in. I felt that I was some kind of white knight for the stock."
…
"At no time did I ever consider that by acquiring shares or CFDs in a company that I supported (and that I intended to continue to support) I was manipulating the market, jeopardising the integrity of the market or unfairly treating other market participants."
…
"The aspect that really troubled me when the offences were brought to my attention was that my actions had not only interfered with the integrity of the market but also potentially unfairly hurt other traders economically. I would never have consciously done that,"
In relation to the offences involving marking of the close:
"This was merely an extension of my price support conduct…"
…
"When I executed each of these trades I was not thinking about anything other than closing the day with a small victory."
…
"I think that the market saw my small volume trades for what they were, namely a vain attempt to support a flagging share price from time to time."
…
"... the practical effect of my manic behaviour was actually zero in terms of price support."
In respect of the Matched Trade Offence he states that he was essentially just transferring his holdings from ETRADE to FP Market accounts and that although such transactions were unlawful "I did not know that at that time." "I did this instantaneously and naively thought nothing more of it. It was just a function of transferring either stock or cash quickly between the CFD (FP Markets) and the share (ETRADE) account." He said this was primarily to smooth out margins between the accounts and:
"I did not think about the washing aspect of it at all…. These 20 inter account transfers were simply an exercise in money management."
…
"At the time of transfers I was completely unaware that I was breaking the law. However I now recognise the fundamental flaw and naivety of that view, given that the trades gave an appearance that unrelated parties were buying and selling the stock which impacted the integrity of the market…. In hindsight it was silly to do these transfers. In my mind, I did not equate the synthetic CFD platform with the real stock exchange. After 20 years of trading this was a stupid and pretty fundamental mistake."
The offender is clearly a highly intelligent man as is demonstrated by his academic achievements and a very experienced trader over a period of some 20 years. He did not give evidence on sentence, and I do not accept that he did not understand that what he was doing was in fact committing offences. As to his being a "champion" in particular of Petsec Energy, as though he were some 'white knight' supporting the company, I am of the view that his conduct was not some altruistic aider of the company, but indeed his conduct was for the purpose stated in the Statement of Facts: that is, that his conduct was to provide price support and in so doing to minimise or avoid Margin Calls that he may have been required to make if the stocks had traded free of his influence.
It is not necessary in relation to offences of this nature that there be any financial gain by the offender. The gravamen of the offence is its effect on a free and open market, uncontaminated by conduct of this nature. What effect his conduct may have had on others is impossible to discern. What effect it may have had in relation to his own accounts, that is what effect it may have had in relation to any Margin Calls that might have been made if he had not indulged in the conduct is also impossible to determine as it is so hypothetical.
Nonetheless, in those circumstances these matters remain serious offences. The conduct in total took place over a period of 20 months - some 18 months in relation to the Market Manipulation Offence and some 15 months in relation to the Matched Trade Offence. He first commenced the Market Manipulation Offence in February 2012 and five months later commenced the Matched Trade Offence.
He ceased the Market Manipulation Offence in August 2013 but continued to commit the Matched Trade Offence until October 2013, some two months after he had ceased the Market Manipulation Offence.
Although the smoothing out of the accounts may have been an additional reason for committing the Matched Trade Offence his conduct was deliberate and not merely reckless. He intended to place himself in a favourable financial position and he did so at the expense and confidence of the investing community in the market for securities. His offences were both planned and premeditated and, as indicated, executed in total over a 20 month period.
I find beyond reasonable doubt that his motive in carrying out the transactions was to increase or maintain the prices of the relevant securities at a level that would avoid him having to contribute more funds to his Trading Accounts or reduce the funds that he would have had to contribute to his Trading Accounts and increase his Free Equity which he could then use to trade in shares, maintain or take other CFD positions or withdraw directly as funds to pay for living expenses.
The offending has also had the effect of protecting the value of the offender's substantial shareholding in the relevant securities and in particular PSA. During the period he also substantially increased his holding in both PSA shares and CFDs.
I do not accept that as an intelligent man with 20 years trading experience he was either naïve or unknowing in respect of his conduct. He was not a champion of PSA but a champion of his own financial interests.
It is of some concern that despite the offender's co-operation and contrition that he continues to bury his head in the sand and claim naiveté and lack of insight at the time into the obvious consequences of his action.
I note that while the Crown's submission on sentence refers to the offender being automatically disqualified from managing a corporation for a period of five years as a result of a conviction in relation to these matters, that is not a disadvantage which has been referred to in the copious submissions made on behalf of the offender. It would appear to only affect him in relation to the conduct of Hales & Co, whose only interest, apart from any assets it might hold, appears to be in share trading, and Karnie's Investments Pty Limited. What particular position he might hold in that company is not clear, although I understand that it was effectively a company set up to hold funds from a number of friends purely for the purpose of trading and which was subject to the control of the offender. It does not otherwise appear that being disqualified from managing a corporation for a period of five years would have any significant effect on him.
I note that the submission made on his behalf refers to his public disgrace and in particular his affidavit annexes to it an internet report of insider trading referring specifically to the offender. That no doubt has been of some embarrassment to him, but it is as a general proposition the inevitable consequence of committing offences that they may be publicised. There is nothing exceptional in relation to such publications being made, and they are an important part of general deterrence.
I have been referred to a number of cases by the prosecution and also by the legal representatives of the offender. I have in the course of making a decision on sentence in respect of this matter referred to all of the cases to which I have been referred. I do not intend to individually refer to them herein. Individual matters always turn on the specific facts or circumstances that are before the Court concerned in that matter. They have been of some general utility rather than any specific utility.
I have already referred to the statements in relation to Matched Trades Offence by the offender as to his desire to smooth or manage his equity in a number of different CFD Trading Accounts as being perhaps an additional reason for his conduct or explanation of it. However, he intentionally carried out those trades at prices above the prevailing market price rather than as a genuine buyer or seller trying to minimise or maximise their gains.
I accept that his dominant purpose in carrying out the trades at those prices was to increase or maintain the share price for the relevant securities to his own financial advantage although that may not be definable in any precise fashion. His conduct distorted the market and increased the value of his overall portfolio and the Free Equity of his CFD Trading Accounts.
As to the submission made that the small price differentials and the relatively small transactions frequently carried out, it is not to the point that they may have been in relation to half cents or cents. Each of the relatively small transactions, particularly in respect of the PSA shares, created significantly larger financial benefits in respect of his own holding.
For example, on 25 July 2013, a $495 transaction resulted in an immediate increase of $32,036 in the market value of his total shareholding and a $7,158 increase in his Free Equity. That $7,158 of Free Equity arising from the $495 transaction could have been used by the offender to enter into more positions or buy shares.
It has also been relied on in submissions that he did not sell shares at a profit following any of the relevant trades. That of course does not mean that he did not, in effect, obtain a financial benefit. He was in those circumstances able to continue to use the Free Equity he had in his accounts which increased as a result of relevant trades to make further trades and he avoided any Margin Call that may have required him to repay his loan facility at short notice.
As to the submission that his small trades had no sustained impact on the market, he did not need to create a sustained impact on the market in order to strengthen his Free Equity and avoid a Margin Call. He simply needed to ensure that the value of the shares did not fall below the value which would give rise to a Margin Call.
The fact that an increased share price caused by the offender may have subsequently fallen back to its previous level does not necessarily mean that there was no lasting or sustained impact on the share price as the offender's illegal conduct may have prevented or lessened a decrease in the share price that would have otherwise occurred.
I have taken into account all of the matters that I have referred to. I have had regard to s 16A and s 17A of the Crimes Act and of the need to give consideration to the sentencing principals contained therein, as well as the need for the sentence to reflect the need for both general and personal deterrence.
I am of the view in relation to the offender that he is unlikely to commit any further offence in the future as a result of the personal impact this offending has had on him. There is however a significant need for the sentence to be imposed to provide general deterrence, particularly in relation to offences that are difficult to detect such as these, and to ensure those who would manipulate or cheat the market by such conduct are deterred from doing so by the realisation that significant penalties will be imposed.
The offending conduct occurred over a significant period; considering the two offences of some 20 months, there is however a significant overlap not just in time but also in relation to the nature of the of the offending and the purposes of it. It has been submitted by the Crown that a sentence of imprisonment must be imposed and it has been submitted by Mr Thangaraj SC on behalf of the offender, acknowledging that a sentence of imprisonment must be imposed, that the Court would consider imposing a sentence of less than two years which might then be served by an alternative means other than fulltime custody.
I have had regard of all of those submissions and I have reached the determination that a period of imprisonment must be imposed and that there is a need for at least some accumulation between the sentences in particular to reflect the different matters, being under two separate provisions of the Commonwealth legislation and for a not entirely contiguous period. I have also had regard to the principle of totality.
Mr Heath, would you please stand.
In respect of what I will simply refer to as Count 2, and the Matched Trades Offence, you are sentenced to a term of imprisonment of 18 months commencing today that will expire on 24 March 2017.
In respect of the Market Manipulation Offence, or Count 1, you are sentenced to a term of imprisonment of two years. That is to commence three months from today: that is, on 25 December 2015, and it will expire on 24 December 2017.
I have had particular regard, although I have not found it to be an exceptional circumstance, to your family position and in particular your daughter and her need for support. I order that after serving nine months you be released on a recognisance release order in the sum of $10,000 without a surety, to be of good behaviour for a period of 18 months.
I am required by the relevant legislation to explain to you the sentence that I have just pronounced. The sentence that I have imposed on you involves you serving a term of imprisonment in custody for a period of nine months. At the expiration of that period you will be released. If you are of good behaviour over the ensuring period of 18 months that will complete your sentence.
On the other hand, if you breach the terms of the recognisance by not being of good behaviour you will be brought back to court and depending on the nature and seriousness of your transgression the Court may impose a fine, extend the period of good behaviour, or impose a different penalty. In particular, depending on the circumstances, the Court may revoke the recognisance release order and send you back to prison for the balance of your sentence.
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SCHEDULE 1 (292 KB, pdf)
SCHEDULE 2 (80.3 KB, pdf)
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Decision last updated: 04 December 2015