AUS: Receivers / administrators appointed to ASX stockbroker

The Australian Securities and Investments Commission (ASIC) this morning commenced an investigation into Opes Prime Stockbroking Ltd. A receiver and an administrator were appointed to Opes Prime yesterday evening and it has been suspended as a trading, settlement and clearing participant of the Australian Securities Exchange (ASX). ASIC has formed a special team to investigate any potential breaches of the Corporations Act. The ASIC investigation team will also work closely with ASX and the receivers. The Deloitte Corporate Reorganisation Group were appointed Receivers of Opes Prime and Ferrier Hodgson appointed as administrators on Thursday 27 March 2008 upon the application of ANZ bank.

Opes Prime has ceased trading.

In a statement by Deloitte, the background became clearer: the directors of Opes Prime discovered something strange in the company's accounts "

"The (Opes) directors appointed John Lindholm of Ferrier Hodgson as voluntary administrator when they became aware of a number of cash and stock movement irregularities in relation to a small number of accounts. The shortfalls in these accounts led the directors to believe the trading operations could not continue."

All client accounts have now been frozen pending further investigation.

The receivership in fact affects the Opes Prime Group which on 25th March announced "

Singapore based Opes Prime Asset Management has appointed Felix Sim as a Principal in its alternative investment business to help introduce capital to its growing stable of talented and innovative absolute return managers. Opes Prime Asset Management provides specialist services to Asia-Pacific hedge funds, including capital raising and marketing, administration, risk management and set up services."

And it's not just Financial Regulators and clients who will be wondering what to do next: in February, the company announced sponsorship of cars racing in V8’s, Porsche Carrera Cup car and Formula 3 as well as interest in Champ Car racing. Their V8 car, running in the support race prior to the Australian F1 GP on 17th March made it to the Podium.

Perhaps telling is that the company formed a governance and compliance department in only February of this year and in a case of unfortunate timing "Opes Prime, a provider of prime brokerage services, has strengthened its corporate governance and legal and compliance obligations by appointing Jennifer Kane as Head of Corporate and Legal Affairs." Kane was previously Head of Compliance for Morgan Stanley, and has previously held senior compliance roles at Goldman Sachs JB Were, Deutsche Bank and JP Morgan. Yesterday must have been an "oh, ******" moment for her.

The Administrators, Ferrier Hodgson, said that they were appointed by "Opes Prime Group Limited and a number of its subsidiaries and related entities including, Opes Prime Stockbroking Limited (“OPSL)".

The position of the Singapore entity is not, at the time of writing, clear. Insolvency practice is jurisdiction specific and therefore a global appointment is technically not possible.

The problems, say Ferrier Hodgson, appear to be "that the solvency of the business was under pressure due to a number of major clients not meeting margin calls." John Lindham of Ferrier Hodgson said "Preliminary investigations indicate that the financiers to the Group hold sufficient collateral securities to cover their positions in full. However, OPSL’s clients are potentially exposed for the difference between the value of the collateral securities they have advanced and the loans provided by OPSL. At this stage, it is too early to estimate the realisable value of OPSL’s assets to meet client claims.”

In addition to stockbroking, the Group was active in corporate finance and asset management. Examination of its media releases in recent months indicate that it was developing a serious interest in so-called hedge-funds, which it properly calls alternative investment strategies.