Stock Exchange confused as insider trading probe begins

By Nicholas Bryant

Friday 19th May 2000

The company being used to form Eric Watson-backed credit giant RMG is in the sights of the Australian Stock Exchange over unexplained spikes in its share price.

The probe has raised questions about which exchange is responsible for monitoring the 83 overseas stocks listed here. The NZSE has admitted it is unsure whether it should be looking into insider trading allegations concerning those stocks.

The ASX is to review share trading in backdoor listing vehicle Frontier Petroleum after Receivables Management Group chief executive Paul Cooney admitted Frontier bosses knew six months ago that RMG was to be backed into the company.

There was a dramatic spike in its share price at the time but the deal was not announced until last month.

"We will be reviewing the matter in light of the information. Officially I can say no more than that," ASX spokesman Gervase Green said.

Mr Cooney told analysts on Monday the decision was made last December to team up with Eric Watson's Cullen Investments and back RMG into Frontier Petroleum, which is listed here and in which Cullen had a significant investment.

On two other occasions Mr Cooney had publicly stated the fundamentals of the deal were done by last December.

On December 29 the ASX asked Perth-based mining company Frontier to explain why its share price had surged from 10c to 21c, saying it regarded timely disclosure of relevant information of prime importance in the operation of an efficient market.

Frontier chief executive John Tarrant replied there were no matters of importance concerning the company and he could not explain the escalating share price.

An even more marked price hike took place in this country, with Frontier more than tripling from 13c to 40c but failing to arouse the interest of the New Zealand Stock Exchange.

The reason appears to be long-standing confusion over which exchange is responsible for dual listed stocks such as Frontier.

Mr Greene insisted the job of chasing up trades on the NZSE rested with New Zealand authorities.

Not so, according to the Stock Exchange's market surveillance panel manager, Philippe Leloir.

"The position is that we leave it for the home exchange to do the inquiries - we always have. We've never made separate inquiries here of Australian companies because they are, after all, Australian Stock Exchange companies," Mr Leloir said.

Frontier Petroleum is listed here and huge numbers of trades were made on the local market.

"Frontier Petroleum is not subject to New Zealand law - well, I mean, is it? I don't know. It's an overseas listing but I don't know - I've never looked into a question of overseas listed issues and their insider trading position in New Zealand," Mr Leloir said.

Eighty-three overseas-listed issues trade here.

Stock Exchange managing director Bill Foster, then played down the unclear transtasman situation. "It's not confusion. Sometimes we just don't communicate as well as we might. If the ASX requests any information on local trades we will be happy to pass it on."

Acting Minister of Commerce,Trevor Mallard, who has been campaigning for tougher laws to sting insider traders, said there was a general problem with the adequacy of the detection and enforcement mechanisms of New Zealand insider trading regulations.

*I've never looked into a question of overseas listed issues and their insider trading position in New Zealand*

- NZSE market surveillance panel manager Philippe Leloir

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