BBY pulled $12m from client account, court hears

Glenn Rosewall leaving the BBY Administrators Meeting in Sydney today.

BBY executive chairman and major shareholder Glenn Rosewall instructed his finance manager to pull $12 million from a client account to meet capital demands from the ASX, a court has heard.

BBY’s former finance manager April Yuen told the Supreme Court that said the money was not returned until May 2012 and then only for two days following a query from the Australian Securities and Investments Commission about client accounts at the firm.

In testimony to a liquidators hearing Ms Yuen said Mr Rosewall had instructed her not to discuss financial matters with him via email, but only in person, and that he did not tolerate his instructions being questioned.

“The tone in the company is always that if Glenn asks you to do it you have to do it,’’ Ms Yuen told the court.

“Basically you can’t question him, and when I raised the question he said you can’t question, you have to do it.’’

Once the largest options broker and one of the biggest stock brokers on the Australian market, BBY collapsed in May 2015, stranding client funds and leaving St George bank chasing $13m in secured loans. The bank faces an estimated shortfall of up to $10m from the liquidation, before any recoveries from legal action.

Liquidator Stephen Vaughan of KPMG estimated last week that the firm faces a shortfall of assets over liabilities totalling $23 million and has alleged the firm may have traded while insolvent for four years from 2011.

In a report last week Mr Vaughan said the firm’s capital was put under pressure by a disastrous 2009 underwriting of Firestone Energy and further strained by expansion including the 2011 of the Stonebridge Securities business and a push to become a self-clearing options broker.

He has alleged the firm may have been insolvent from the time it drew funds from the Saxo account that was linked to Stonebridge that held surplus “margin’’ for clients who traded foreign exchange and contracts for difference through the firm.

Mr Vaughan is conducting two weeks of court hearings interviewing staff at the firm as well as Auditors BDO, tennis great Ken Rosewall, his son Glenn and David Perkins, who were the three directors of the firm in a bid to establish potential claims against a directors and officers insurance policy.

Ms Yuen, who joined the firm in 2007 and rose to strategy manager said that in December 2011 she had been instructed by Mr Rosewall and chief operating office Arun Maharaj to pull $12m from the Saxo high-yield account and transfer to a BBY corporate account in December following a demand from the ASX for capital to underwrite its options business.

Under questioning from counsel for KPMG, Ms Yuen agreed that she had been instructed by Mr Rosewall and Mr Maharaj to transfer the money from Saxo account.

“The told me it would be OK and the funds would be replenished,’’ Ms Yuen said

“Arun said it would be replenished, I think the ASX would return it the next day.’’

She said the instruction had followed references to a “money problem” in late 2011 when she intercepted a phone call from operations manager Fiona Bilton to Mr Maharaj, but she was not aware what the money problem was.

The ASX required the firm to transfer $9.5 million to the ASX Clearing House to underwrite the expansion of its options broking business.

Ms Yuen said she had asked several times why the money had not been returned to the account but was reassured by Mr Maharaj that it would be.

She also agreed she had been asked by Mr Maharaj to collect funds from other accounts in the firm, including client accounts and deposit them into the Smartrader (as Stonebridge was renamed) account following a query from ASIC.

Ms Yuen said compliance manager Peter Clavin — a former Stonebridge employee — had relayed the request from ASIC to verify that client money was in place.

The money was returned to the other accounts two days after the bank statement showing the balance of $12m was obtained.

The hearing continues.