A backlash over the dumping of borrowed stock and hedge funds short selling has triggered the corporate regulator and the Australian Securities Exchange (ASX) to issue a second round of warnings to the market.
ASIC and the ASX circulated three statements yesterday to clarify and reinforce market disclosure obligations following a major bout of trading turmoil.
Several high-profile companies have seen their share prices plunge in recent weeks after the unwinding of multi-million-dollar margin loans taken out by directors in their own securities.
"People engaged in stock lending or stock borrowing should carefully examine their obligations to lodge substantial holding notices," the regulators said.
The ASX said it is looking into transparency and settlement risk issues associated with short selling.
Hedge funds have come under fire over allegations they are distorting the usual practice of short selling by artificially provoking the sale of securities in order to reduce the market price.
ASIC confirmed it had been approached by "a number of market participants concerned that some individuals are deliberately spreading false or misleading information about listed securities".
"Conduct of this type can be a criminal offence and ASIC, in conjunction with the [ASX] will be vigilant in monitoring the market to ensure this type of behaviour is detected and prosecuted," ASIC said in a statement.
Company directors including former Allco Finance Group's former chairman David Coe, former Centro chief executive Andrew Scott and ABC Learning's Eddy and Le Neve Groves, were all forced to offload stocks in their own companies following sharp declines in the stock's value.
The Groves were accused of failing to notify the market adequately of the margin loans attached to their securities.
Eddy Groves responded by blaming hedge funds for deliberately driving down prices by short selling.
