THE involvement of two members of the board of Australia's share market operator in a trading scandal in the US was unfortunate, their chairman says.
ASX chairman Rick Holliday-Smith has also said he knew about the directors' involvement in the matter weeks before the findings of an investigation were made public, but was given legal advice not to act.
Shane Finemore and Russell Aboud resigned from the ASX board on September 19 after their hedge fund, Manikay Partners, was fined $US2.6 million by the Securities and Exchange Commission (SEC) in the US.
Manikay agreed to pay the fine, which related to the short-selling of Citigroup shares in 2009, but made no admission of guilt.
Mr Finemore is managing partner of Manikay, while Mr Aboud is the New York hedge fund's chairman.
Mr Holliday-Smith said he was made aware of the SEC investigation after the Australian Securities Exchange issued its notice of annual general meeting on August 26.
But the SEC investigation was confidential and unresolved, and he followed legal advice on the matter.
"It was clear the matter could not be properly considered by the board until the SEC process was understood and the confidentiality issues were resolved," Mr Holliday-Smith told shareholders at ASX's annual meeting on Wednesday.
"Clearly, these events are unfortunate for all concerned."
After the SEC announced its findings, Mr Aboud and Mr Finemore consulted with Mr Holliday-Smith and advised him they would resign, for the best interests of the company.
"They did not want any reputational issues for ASX to arise as a consequence of these matters," Mr Holliday-Smith said.
As part of its normal board renewal process, ASX has a strong list of candidates that will be considered to replace Mr Finemore and Mr Aboud, he said.
Shareholders approved the appointment of former Treasury secretary Ken Henry for full term on the board of ASX on Wednesday, after he joined the company in February.
Meanwhile, chief executive Elmer Funke Kupper said market activity levels in the first two and a half months of the 2013/14 financial year had been stronger than in the same period last year.
"This level of growth is encouraging, although the activity levels do not yet match the strong performance of the second half of FY13," he told shareholders.
ASX shares dropped eight cents to $34.70.
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