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'Rogue trader' on trial in Perth

A former financial adviser lied to his clients to persuade them to loan him shares and cash that he used for risky investments, a Perth court has heard.

Todd Michael King is on trial in the District Court of Western Australia, charged with fraud and stealing following an investigation by the Australian Securities and Investments Commission.

Prosecutor Paul Yovich alleges that in 2007, the accused duped a retiree into loaning him 85,000 Wesfarmers shares - worth $3.3 million at the time - as collateral for a margin loan account held by King's mother so she could buy shares.

Mr Yovich said during his opening submission on Tuesday that King persuaded Mr Smith to provide the security to "a complete stranger" by pledging, among other things, to return the Wesfarmers shares within six weeks.

Mr Smith was also allegedly told he was acting as a temporary stand-in for King's stepfather, who was in Canada but would provide the collateral on his return, Mr Yovich said.

But that was a lie.

"There was no other person that was going to step in after the six weeks," Mr Yovich said.

Mr Yovich said King breached a key condition of his agreement with Mr Smith, engaging in a rash of share buying and selling on the margin loan account, putting his collateral at risk.

When the global financial crisis hit, the account was left in bad shape and margin calls were made.

So King transferred a further 40,000 Wesfarmers shares from Mr Smith without his knowledge, copying and pasting a signature obtained from an earlier document.

Mr Yovich said Mr Smith only received 25,000 of his shares back.

The court also heard King convinced another client in 2008 to loan him $1.2 million after telling her a fictitious "sob story" about a customer who had left him in the lurch by reneging on an agreement to pay for shares he'd bought for them.

But instead, King used the funds for his own purposes, buying Rio Tinto and Babcock & Brown warrants.

Mr Yovich said both clients would not have provided the loans if King had told them the truth.

King's defence lawyer Linda Black will make her opening submission on Wednesday.