ASX chairman Rick Holliday Smith was told by the directors of their intentions last night following a board discussion over a US Securities and Exchange Commission fine imposed on Manikay for short-selling shares in Citigroup in 2009.
The SEC has fined Manikay $US2.65 million ($2.83m), including its profits on the trade. Manikay was among 23 funds that were caught up in a wide-ranging crackdown by the SEC on short selling.
In a short statement to the stock exchange this morning, ASX said that Mr Aboud and Mr Finemore had advised the board of their resignation as directors. As a result, Mr Finemore would not stand for re-election at ASX's annual general meeting on September 25, the company said.
Chairman Rick Holliday-Smith thanked the men for the "valued contribution" they had made since joining the board.
In a separate statement, Mr Holliday-Smith said that the event that triggered the directors' resignations did not raise any issues with regard to the AXS's governance. The markets operator oversees governance standards for about 2000 public companies in Australia.
"ASX has an ongoing program of board renewal and this process will now be used to find suitable replacements in the coming months," the chairman said.
ASX board members held a discussion yesterday after news of the fines totalling $US14.4m broke. Mr Finemore was in New York; Mr Aboud was in Australia.
Mr Aboud last night told The Australian that he was sad to have to resign, but that it was "the right thing to do" to avoid any perception problem for the ASX.
"We would not have done it otherwise," Mr Aboud said.
The short-selling of the Citigroup shares was an "inadvertent" breach by the firm of the rules governing short selling, Mr Aboud said.
"I don't think that there is a governance perception issue for the ASX arising from this but the cleanest thing for us to do in the circumstances is to resign," he said.
Mr Aboud is a former global head of European equities at investment bank UBS who joined the ASX in July 2005.
Mr Finemore is a former member of the UBS investment bank board who joined the ASX in 2007 and is on the boards of Ron Finemore Transport and the taskforce on Australia as a Financial Services Centre.
Manikay Partners is a $US1.5bn New York hedge fund set up by Mr Aboud and Mr Finemore in 2008.
The fund has grown from $US300m committed by backers including shopping centre billionaire Frank Lowy and returned 26.5 per cent last year.
Mr Finemore, who is described in the ASX annual report as a recognised authority on stock exchanges, had been due to face re-election for his place on the ASX board.
The fines are for violating rules against short-selling shares in a company within five days of a public offering and then buying the shares through the offering.
Short selling is selling shares you do not own in the expectation that the price will fall and you will be able to buy them back at a profit at a later date.
The SEC proceedings say Manikay short-sold two million shares in Citigroup on December 16, 2009, ahead of the bank pricing a share offering that saw Manikay allocated 30 million shares at a discount to the market price.
The trade netted the firm $US1.675m in profits.
Manikay has 14 days to pay the SEC that "improper" profit, plus interest and penalties.
Also caught in the crackdown were Hudson Bay Capital Management, the Ontario Teachers' Pension Fund Plan and Deerfield Management.
theaustralian.com.au 19 Sep 2013