Australia, Ex-Macquarie Banker pleads guilty to Insider Trading

September 23, 2010Andy No Comments »

The day before he was due to be released from jail after a 6-month sentence for contempt of court, the former Macquarie Bank associate director Oswyn De Silva has pleaded guilty to insider trading charges brought by the Australian Securities and Investments Commission (ASIC).

The 37-year-old man, who worked as as a portfolio manager and associated director for Macquarie Investment Management (MIML) for the period from 2005 to 2008, admitted to making 12 trades in 8 different stocks armed with insider information between 20 December 2006 and 26 April 2007. The ex-portfolio manager who ran a $4.45 billion fund at the bank pleaded guilty acquiring shares and CFDs when he knew his employer was intending to buy large volumes of the same shares and this would have likely caused the price of the shares and the value of the CFDs to increase. ASIC alleged that between December 2006 and April 2007, while working at Macquarie in Singapore, de Silva bought stocks and CFDs in respect of eight entities listed on the Singapore Exchange while possessing inside information. The stocks involved were Ascendas Real Estate Investment Trust, The Ascott Group, Hong Kong Land Holdings, Yanlord Land Group, Gallant Venture, CDL Hospitality Trusts, Hotel Properties and Mapletree Logistics Trust.

Shortly after acquiring the shares and contracts for difference holdings Oswyn De Silva disposed of them for considerable gains, often selling the shares directly to MIML. De Silva is thought to have gross gains amounting $1,412,975 by using inside information for this type of insider trading – sometimes referred to as ‘front running’. Front-running is so called because the stock market trader places the personal orders in front of larger portfolio orders he is about to place. The charge carries a maximum penalty of five years’ imprisonment, a $220,000 fine, or both. De Silva did not seek bail and the matter returns to the Sydney Central Local Court on 29 September 2010.

The stocks involved were listed on the Singapore Exchange between December 2006 and April 2007. ASIC said De Silva’s trading was referred to it by the Monetary Authority of Singapore and the regulator has acknowledged the ongoing assistance of the Monetary Authority of Singapore and Macquarie Bank during its investigation.

ASIC started its investigation on February 26 and that day obtained an order from the NSW Supreme Court preventing De Silva from leaving the country. He was arrested three days later boarding a flight from Perth to Kuala Lumpur and on March 24 Justice George Palmer sentenced him to nine months in prison with a non-parole period of six months for contempt of court, a charge imposed after he tried to leave Australia from Perth on March 1 after learning he was being investigated. At the time, Justice Palmer allowed ASIC a month to initiate civil proceedings and urged it to lay any criminal proceedings in a timely manner. ‘ASIC should act on the basis that Mr De Silva will not be compulsorily detained in Australia any longer than his sentence,’ the judge stated. During his March contempt hearing, De Silva admitted to the illegal trading, bursting into tears in court and saying he had panicked at the thought of being in trouble with ASIC and that he felt so guilty about the trades that he ‘deliberately’ lost the money he had gained through making subsequent trades. Australian Securities and Investments Commission pointed out that he was more likely to have just lost the money while trading during the global financial crisis. However, ASIC was unable to use his admissions as evidence against him because the court gave him protection under legal privilege to explain his behaviour in mitigation for his contempt of court offence. In March, he admitted to 29 transactions that delivered profits of A$3.6 million. Yesterday’s guilty plea was to only 12 transactions.

De Silva is a Malaysian resident and has previously described Macquarie as an ‘inhuman’ place to work which forced ‘people to perform’ and admitted to abusing cocaine and was suffering from depression and panic attacks. He added that he had changed his mind about the bank after he received a termination payment when he resigned due to complications with his HIV illness. De Silva told the same hearing his illegal trading on 29 transactions was a kind of ‘performance fee’ for working what he called ‘inhuman hours’ for the bank.

ASIC’s civil penalty proceedings against de Silva in the Supreme Court of New South Wales have been automatically stayed as a result of this criminal action. The matter returns to the Central Local Court on 29 September for sentencing.

Former Mcaquarie executive Oswyn de Silva is under investigation

Former Mcaquarie executive Oswyn de Silva is under investigation

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