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ASX Directors Resign After SEC Action Against Hedge Fund

ASX Ltd.
A pedestrian waits to cross the road outside the Australian Securities Exchange (ASX Ltd.) headquarters in Sydney. Photographer: Sergio Dionisio/Bloomberg

Shane Finemore and Russell Aboud resigned from their positions on the board of ASX Ltd. after their hedge fund, Manikay Partners LLC, agreed to settle claims of improperly buying shares of companies they had bet against.

Aboud said by telephone today that he spoke to ASX Chairman Rick Holliday Smith informing him he would resign. New York-based Manikay agreed to pay $2.6 million to settle the action. The hedge fund was sanctioned by the U.S. Securities and Exchange Commission as part of an enforcement against 23 firms, the agency said in a statement Sept. 17. Aboud, a member of the board of the ASX, is chairman of the fund.

“I don’t believe it creates any governance issues at the ASX,” Aboud said. “But even a perception of an issue has the ability to damage the ASX. I think it was the right thing to do.”

Aboud said the action stemmed from a Citigroup Inc. share sale in 2009. ASX board member Finemore is the managing partner of Manikay. Finemore did not respond to e-mailed requests for comment. The company made no admission of guilt. ASX confirmed the two resignations in a statement today.

The firms cited in these cases allegedly bought shares from an underwriter, broker or dealer participating in a share sale after having sold short the same security during the restricted period, according to the SEC statement. In a short sale, speculators borrow and then sell securities on expectations they will be able to repurchase the shares at a cheaper price before returning them to their owners.

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