Company disputes CIMA records request

An international stock trading platform is disputing a Cayman Islands Monetary Authority attempt to obtain records from the company – records the company claims it does not have – for an ongoing investigation in Australia.

The Australian Securities and Investments Commission has been trying to obtain information from the stock trading platform – a group of companies known as the Vantage Group – for an ongoing investigation into alleged market rigging it has been conducting since March 2015, according to Australian federal court documents.

Cayman authorities became involved in the matter earlier this year when the Australian regulator requested information from CIMA about Select Vantage, a Vantage Group company that is domiciled here.

On Monday, the Cayman Islands Court of Appeal heard the latest of a series of challenges that began when Select Vantage asked Grand Court Justice Raj Parker to overturn a court order CIMA obtained in March for the company to turn over the telephone numbers, addresses, and trader identification numbers of each Vantage Group trader involved in the investigation in Australia.

Select Vantage challenged the order on the grounds that it could not comply because Select is only a subsidiary company that holds stock trading capital, and therefore does not hold information about traders. The company that actually employs traders is domiciled in Anguilla and operates in Costa Rica, according to Select Vantage.

Select Vantage also argued that the order should not have been made ex parte – Mr. Parker granted CIMA the order in March without Select Vantage having the chance to argue against it – and that the company should have access to evidence that was presented during the ex parte hearing.

Finally, Select Vantage requested that if Mr. Parker declined to overturn the order CIMA obtained from him in March, then he at least should stay the order pending a judicial review challenge Select filed in the Australian courts over the same issue. In that case, Select argued that the Australian Securities and Investments Commission breached the “rules of natural justice” by making its request to CIMA.

In his July 12 judgment, Mr. Parker did not accept any of Select Vantage’s arguments.

Pointing out that one person, Toronto resident Daniel Schlaepfer, is the principal of all the Vantage Group companies, the justice wrote that the company’s argument that it cannot comply with the order is “less than convincing.”

As for the argument that CIMA’s application for the order should not have been ex parte, Mr. Parker said that giving Select Vantage notice about the hearing “may have precipitated action which the application was designed to prevent – that is, to say the potential disappearance of the material.” Mr. Parker added that Select Vantage may not have all the evidence that was presented at the ex parte hearing, but received CIMA’s redacted skeleton argument, which makes it clear why CIMA is requesting the company’s records.

Along with striking down Select Vantage’s challenges, Mr. Parker also declined to stay the order pending the judicial review in Australia.

Select Vantage applied for leave to appeal Mr. Parker’s decisions. On Sept. 21, Justice of Appeal Dennis Morrison allowed Select Vantage to appeal on one ground: whether the judge erred in ordering that the ex parte materials should not be disclosed to SVI subsequent to the making of the ex parte order.

“It may well be arguable that [Mr. Parker’s] refusal to order disclosure of anything other than CIMA’s redacted skeleton arguments on the ex parte application is out of line with the conventional approach,” Mr. Morrison wrote when granting leave for appeal.

Mr. Morrison also granted a stay on the CIMA order pending the appeal.

On Monday, attorneys for Select Vantage and CIMA further argued whether the company should have all the evidence that was presented against it in the ex parte hearing.

“[Mr. Parker’s decision] seems to be emboldened by what was presented at the ex parte hearing … He had something in mind that we weren’t allowed to learn,” stated Select Vantage’s attorney, Tom Lowe.

For CIMA’s part, attorney Neil Timms argued that the regulator made its application ex parte and sought to keep the evidence from Select Vantage because “we weren’t confident that we could keep the material confidential.”

Mr. Timms added that none of the evidence that Mr. Parker reviewed would have tainted his judgment on the technical issue of whether Select Vantage could comply with the court order.

Before the hearing ended, Mr. Lowe disputed any suggestion that Select Vantage records might “dissipate” if the company had more information about why the regulators were seeking the company’s records.

Cayman Islands Court of Appeal President John Goldring reserved the court’s judgment for a later date.

*This story has been updated to clarify the nature of the Australian Securities and Investments Commission’s investigation, as well as facts about Select Vantage’s challenge to the Cayman Islands Monetary Authority’s request for records.