BBY Limited

BBY Limited, formerly known as Burdett Buckeridge Young, was an Australian financial-services group operating across institutional and private-client stockbroking, corporate advisory, equity capital markets, research, sales and trading, asset management, and broker-dealer services. Established in 1987 by three former A.C. Goode & Co. brokers with the involvement of the State Bank of Victoria, BBY developed from a domestic brokerage into an independent investment and advisory platform serving listed and emerging companies, institutional investors, private clients, and high-net-worth customers. The company’s business model combined research and execution with corporate-finance and capital-raising capabilities. It promoted itself as an independent intermediary for emerging companies and their investors, offering services that included equity research, institutional broking, private-client advice, corporate transactions, portfolio administration, derivatives, warrants, foreign exchange, funds management, and related trading products. Its main office was in Sydney, and it maintained or established offices in Australian centres including Melbourne, Brisbane, Adelaide, Perth and the Gold Coast, as well as in Auckland, Wellington, London and New York. BBY expanded through strategic alliances and acquisitions. Its relationship with Jaguar Asset Management began as an alliance in 2004, with Jaguar managing director Glenn Rosewall becoming BBY’s chief executive, and BBY completed the acquisition of Jaguar in 2006. In 2008, it formed a partnership with CIMB, a major Southeast Asian financial-services group. In 2011, BBY acquired the private-client adviser network of StoneBridgeGroup and subsequently moved toward self-clearing through GBST’s Shares platform. In 2013, it acquired a majority interest in New Zealand advisory firm Edge Capital, strengthening its presence in Auckland and Wellington. The following year it launched a China Desk aimed at Chinese expatriate and mainland Chinese clients. During its expansion, BBY received industry recognition and reported strong positions in Australian investment-banking and equity-market surveys. It was ranked among Australia’s larger domiciled stockbrokers by trading activity and claimed to be the largest independent stockbroker in Australia and New Zealand by market share before its collapse. The firm also reported a growing adviser and broker-dealer network and broadened its service offering beyond traditional broking. BBY’s financial position was severely damaged by its handling of a large Aquila Resources share transaction in June 2014. The trade and other open positions generated substantial margin requirements from ASX Clear. According to the subsequent administration process, BBY became insolvent on or around 11 or 12 June 2014 when it executed the transaction, although the companies remained in operation for a further period. BBY companies entered voluntary administration on 18 May 2015, and some entities entered liquidation on 21 June 2015. The failure ended the operation of BBY as an independent financial-services group and prompted scrutiny of its risk controls, capital position, market obligations and the conduct of relevant market institutions.

BBY Limited was founded in Australia in 1987 under the name Burdett Buckeridge Young. Its founders were three former brokers from A.C. Goode & Co., working with the State Bank of Victoria. When the State Bank was acquired by Commonwealth Bank in the early 1990s, its interest in BBY was disposed of. Jefferies & Co. later acquired an equity interest. The firm built its business around institutional broking, equity research, corporate finance and capital raising. Its research platform supported both trading and advisory activities, enabling BBY to serve companies seeking investment, financing or market access as well as investors seeking execution and analysis. The group established a Sydney headquarters and developed a wider office network across Australia, New Zealand, the United Kingdom and the United States. In 2004, BBY and Jaguar Asset Management entered into a strategic alliance. Jaguar managing director Glenn Rosewall was appointed BBY chief executive, and BBY completed the acquisition of Jaguar in 2006. In 2008, the company received recognition for a corporate transaction and entered a partnership with CIMB, extending its connections into Southeast Asian financial services. BBY continued expanding its private-client and market-infrastructure capabilities. In 2011, it acquired the private-client adviser network of StoneBridgeGroup. The combined operation included more than 80 advisers and support staff and offered equity and options trading, futures, warrants, over-the-counter trading, currency, funds management, portfolio administration and reporting. After the acquisition, BBY began self-clearing through GBST’s Shares equities clearing and settlement platform and moved toward a more integrated system covering derivatives, shares, risk, front-office functions and infrastructure hosting. The firm reported increasing market activity and received favourable rankings in independent investment-bank surveys. By 2013, it had acquired a majority stake in New Zealand advisory business Edge Capital, opened offices in Auckland and Wellington, and reported more than 110 client advisers and 300 broker-dealer advisers. It also launched a China Desk serving Chinese expatriates and mainland Chinese customers. BBY’s public profile during this period reflected its ambition to operate as a regional independent investment bank rather than solely as a traditional Australian broker. The company’s expansion was undermined by risk and liquidity problems associated with a large Aquila Resources transaction. On 11 June 2014, BBY acquired approximately A$192 million of Aquila shares for a client. On the following day, ASX Clear required margin payments associated with the trade and BBY’s other open positions. The obligations included initial margin, variation margin and an additional payment under the clearing-participant rules. The available information describes discussions concerning the additional margin call and the firm’s ability to meet its obligations. A later preliminary finding by administrator KPMG stated that BBY and other BBY companies became insolvent on or around 11 or 12 June 2014, when BBY executed the Aquila transaction. The group nevertheless continued until the companies entered voluntary administration on 18 May 2015. Some entities entered liquidation on 21 June 2015. The collapse ended BBY’s operations and left its earlier growth, acquisitions and market positioning overshadowed by questions about client-trade risk, margin management, conflicts of interest, capital adequacy and regulatory oversight.

1. 2015Voluntary administration

   BBY companies entered voluntary administration in May; certain entities entered liquidation the following month.

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2. 2014Aquila Resources transaction

   BBY executed a large Aquila Resources share transaction that generated significant margin obligations and later became central to the group’s insolvency.

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3. 2013Expansion into New Zealand

   BBY acquired a majority stake in Edge Capital and opened offices in Auckland and Wellington.

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4. 2011StoneBridgeGroup private-client network acquired

   BBY acquired the private-client adviser network of StoneBridgeGroup and began implementing self-clearing capabilities.

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5. 2008CIMB partnership established

   BBY formed a partnership with CIMB to broaden its regional financial-services relationships.

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6. 2006Jaguar Asset Management acquisition completed

   BBY completed the acquisition of Jaguar Asset Management.

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7. 2004Strategic alliance with Jaguar Asset Management

   BBY and Jaguar Asset Management formed an alliance, with Jaguar managing director Glenn Rosewall becoming BBY chief executive.

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8. 1987BBY was established

   Three former A.C. Goode & Co. brokers established the firm with the involvement of the State Bank of Victoria.

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An independent Australian and New Zealand investment and advisory firm focused on emerging companies, institutional investors, private clients and capital-markets transactions.

• Institutional broking and equity researchInstitutional financial services

  BBY provided institutional sales, trading and research services focused on equities and emerging companies. Its research platform also supported corporate-advisory and capital-raising work, linking issuer analysis with investor distribution and execution.

• Corporate finance and equity capital marketsInvestment banking

  The corporate-finance business advised companies and investors on capital raising and related transactions. It formed part of BBY’s effort to operate as an independent investment bank serving smaller and emerging listed companies.

• Private-client advisoryWealth and investment services

  Through its own network and the StoneBridgeGroup acquisition, BBY offered private clients access to advisers, equity and options trading, futures, warrants, over-the-counter products, currency services, funds management, and portfolio administration and reporting.

• Asset management and broker-dealer servicesDiversified financial services

  BBY’s broader platform included asset management and broker-dealer services alongside its broking and advisory activities. These capabilities were intended to provide investors and corporate clients with a broader set of market and portfolio services.

• 2014Execution of the Aquila Resources transactionOther

  BBY was acting for a client in the market while carrying other open positions.

  What changed. On 11 June 2014, BBY acquired approximately A$192 million of Aquila Resources shares on the client’s behalf.

  Aftermath. The trade contributed to major margin obligations. KPMG later preliminarily concluded that BBY became insolvent on or around 11 or 12 June 2014.

  Aquila Resources shares acquired. Approximately A$192 million transaction (11 June 2014)

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• 2013Acquisition of Edge CapitalM&A

  BBY sought to extend its private-client and advisory platform beyond Australia.

  What changed. It acquired a majority stake in New Zealand advisory firm Edge Capital and opened offices in Auckland and Wellington.

  Aftermath. The transaction strengthened BBY’s Australia–New Zealand footprint and preceded the launch of its China Desk.

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• 2011Move toward self-clearingStrategy

  Following the StoneBridgeGroup acquisition, BBY sought greater scale and operational integration for its private-client and trading businesses.

  What changed. The firm began self-clearing through GBST’s Shares equities clearing and settlement platform and moved toward an integrated system covering equities, derivatives, risk and front-office functions.

  Aftermath. The initiative expanded BBY’s operational capabilities, but the available reference material does not establish its separate financial outcome.

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• 2015Collapse into administration and liquidationControversy

  BBY companies entered voluntary administration in May 2015, followed by liquidation of certain entities in June. The collapse raised questions about risk controls, margin obligations and the governance of the failed financial-services group.

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• 2014Aquila Resources transaction and insolvency concernsControversy

  A large Aquila Resources share acquisition for a client produced substantial margin requirements alongside BBY’s other open positions. KPMG later made a preliminary finding that BBY became insolvent around the time the trade was executed.

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• 2005ASIC conflict-of-interest warningControversy

  ASIC warned BBY over alleged shortcomings in managing conflicts arising from positive research published about a corporate client that BBY was advising. Special conditions were imposed on the firm’s financial-services licence.

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• 2013BBY acquired a majority stake in Edge Capital

  The firm acquired majority ownership of New Zealand private-client advisory business Edge Capital and expanded its presence in Auckland and Wellington.

  M&A
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• 2011BBY acquired StoneBridgeGroup’s private-client adviser network

  BBY expanded its private-client business through the acquisition of the adviser network of Australian firm StoneBridgeGroup.

  M&A
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• 2006BBY acquired Jaguar Asset Management

  BBY completed its acquisition of Jaguar Asset Management after an earlier strategic alliance between the two businesses.

  M&A
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1. BBY Limited