BBY has bigger capital problems than anyone thought

Sydney. Photo: Getty Images

The money owed by failed stockbroker BBY is piling higher the deeper investigators dig into the books, making it increasingly difficult to sell the business.

The reported $2 million to $3 million needed to keep the business going is now seen as small change, according to sources close to the ongoing investigation.

And the sources say that trades executed on Friday, even before BBY went into administration on Monday, are being wound back.

This further complicates the future of those holding accounts with BBY. The ASX has set up a special online information site.

However, account holders basically have to wait to hear from the administrators, Stephen Vaughan and Ian Hall of KPMG, who were called in yesterday as the 170 staff were informed by email that the company had been unable to secure investors to inject additional capital into the business.

The stockbroker was negotiating with George Wang’s AIMS Financial Group for a capital injection right up to Sunday night, the sources said.

However, the size of the capital needed kept growing and in the end Wang walked away.

It is understood the St George Bank receivers, Stephen Parbery and Brett Lord of PPB advisory, are finding more and more liabilities. One source said the debts had reached $14 million.

And staff, mainly those in the corporate finance area, were still owed large commissions from recent capital raisings.

BBY was started in 1987 and has more than $2 billion in assets under administration. It claims to have turnover of $2.4 billion in ASX equities per month.

The ASX and ASIC, the corporate watchdog, are working closely together. The ASX is the market operator and central clearer for the equities and exchange traded options markets.

“ASIC will consider further the circumstances surrounding the voluntary administration and receivership of BBY, particularly those concerning compliance with laws on governance, disclosure and conduct,” it says.

“Under the law, including the Corporations Act and Market Integrity Rules, licensees such as stockbrokers must keep client money separate from their own. This is an important safeguard to protect the interests of retail investors. Client money must be adequately protected.”

Glenn Rosewell, the executive chairman of failed stockbroker BBY, is a member of the corporate watchdog’s Market Disciplinary Panel. He is the son of tennis great Ken Rosewell who is also a member of BBY’s board.

Last year the same panel issued a $90,000 infringement notice against BBY for failing to ensure that its Automated Order Processing system had in place resources, including automated filters, which wouldn’t interfere with the efficiency and integrity of the ASX market.

BBY paid the fine imposed by the ASIC panel and hired an outside IT consultant to fix the problem.

Rosewall is listed as a member with 33 years’ experience as a chartered accountant and master stockbroker.

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