LAWFUEL – Law Newswire – Mr Michael Kwong, of Reservoir, Victoria, today pleaded guilty in the Melbourne County Court to six charges following an investigation by the Australian Securities and Investments Commission (ASIC).
Mr Kwong pleaded guilty to charges associated 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.
As an authorised representative of Smith Barney, a licensed securities dealer and stockbroker between 21 January 2002 and 26 May 2003, Mr Kwong:
• transferred, without authorisation, positive exchange traded option positions from non-associated client accounts to accounts of which he, or associates of his, had control; and
• transferred, without authorisation, negative exchange traded option positions to non-associated client accounts from accounts of which he, or associates, had control.
As a result of the unauthorised transfers, non-associated client accounts sustained losses of approximately $400,000 while associated client accounts made gains of approximately $400,000.
Between 11 March 2002 and 31 July 2003, Mr Kwong also opened and operated a cash management trust account in a false name with Macquarie Investment Management Limited. Further, Mr Kwong made and used a copy of a Victorian driver’s licence in a false name on or about 27 February 2002.
The matter was adjourned for sentencing.
The Commonwealth Director of Public Prosecutions is prosecuting the matter.
Background
In October 2003, ASIC permanently banned Mr Kwong from acting 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, while 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.
