Wednesday 11 October 2006 LAWFUEL – Australia Law News – Mr Michael Kwong, of Reservoir, Victoria, has appeared in the Melbourne Magistrates’ Court in relation to 43 charges following an investigation by the Australian Securities and Investments Commission (ASIC). Mr Kwong is charged with dishonestly using his position as an employee of Smith Barney Citigroup Australia Pty Ltd (Smith Barney), opening and operating an account with a cash dealer in a false name, and making and using a false document.
Mr Kwong was employed as an authorised representative of Smith Barney, a licensed securities dealer and stockbroker, between 21 January 2002 and 26 May 2003.
ASIC alleges that Mr Kwong: • transferred, without authorisation, positive exchange traded option positions from non-associated client accounts to accounts to which he, or associates of his, had control; and • transferred, without authorisation, negative exchange traded option positions to non-associated client accounts from accounts for which he, or associates, had control. As a result of the unauthorised transfers, ASIC alleges that non-associated client accounts sustained losses totalling $433,018.18 whilst associated client accounts made gains totalling $394,886.25. ASIC also alleges that between 11 March 2002 and 31 July 2003, Mr Kwong opened and operated a cash management trust account in a false name with Macquarie Investment Management Limited and that on or about 27 February 2002, he made and used a false document, being a copy of a Victorian driver’s licence in a false name. The matter was adjourned until 6 December 2006.
The Commonwealth Director of Public Prosecutions is prosecuting the matter. Background In October 2003, ASIC permanently banned Mr Kwong from doing any act as a representative of a dealer or investment adviser following receipt of a report from Smith Barney in relation to Mr Kwong’s trading activities. Mr Kwong consented to the permanent ban whilst making no admissions in relation to his conduct. An exchange traded option (ETO) is a financial product traded on the Australian Stock Exchange which gives the holder the right to buy or sell a parcel of shares at a set price on or before a predetermined date.
ETOs consist of either call or put options. A call option gives the holder the right, but not the obligation, to buy a parcel of shares at a set price, whilst a put option gives the holder the right, but not the obligation, to sell a parcel of shares at a set price. The set price for both call and put options is called the strike price. The value of the option is considered to be positive when the strike price for a call option is lower than the prevailing market price for the relevant shares or when the strike price for a put option is higher than the prevailing price for the relevant shares.
The value of the option is considered to be negative when the strike price for a call option is higher than the prevailing market price for the relevant shares or when the strike price for a put option is lower than the prevailing price for the relevant shares. For further information contact: Angela Friend ASIC Media Unit Telephone: 03 9280 3338 Mobile: 0412 058 800
