Finclear Execution has paid a penalty of $70,000 for failing to comply with on-market buy-back rules.
The Markets Disciplinary Panel (MDP) found Finclear contravened market integrity rules in relation to a pre-arranged crossing in April 2018 for an on-market buy-back to take place on the Chi-X.
The crossing of 4.1 million shares represented approximately 87% of the remaining shares of an unnamed listed company was offering to buy back.
Finclear originally executed and reported the trade to Chi-X as a special crossing, which is not permitted for on-market buy-backs as it is not carried out in the ordinary course of trading.
According to ASIC, Finclear realised its error after the close of trading day, informed the regulator, and cancelled the special crossing. The shares were trading on a cum-dividend basis at that time but the next day traded ex-dividend.
Finclear then went to the ASX to create a special cum-dividend market for the shares, and was able to match the trades in seven seconds. But ASIC told Finclear that to give other participants an "equal opportunity" to sell into the buy-back, any proposed bid might need to be placed in the market for a longer period.
The MDP considered Finclear's actions contravened market integrity rules and resulted in creating a market for the shares that was neither fair nor orderly.
Finclear was aware of ASIC's expectations that the offer should have been held in the market for a prolonged period of time, the MDP said, adding it would have removed any unfairness.
Furthermore, the MDP found that Finclear's original execution of the trade as a special crossing lacked knowledge from its staff, who should have been aware of the restrictions on special crossings for on-market buy-backs.
It was an isolated mistake - albeit a significant one in the context of the buy-back, the MDP found, and fell short of demonstrating that Finclear itself lacked organisational competency.