In a statement on Wednesday, the corporate regulator said compliance failures relate to Macquarie’s futures dealing business and its over-the-counter (OTC) derivatives trade reporting.
In response, the regulator has imposed additional conditions on Macquarie, ordering it to develop a remediation plan addressing failures in its futures dealing and OTC derivatives reporting, appoint an independent expert to assess the plan’s adequacy, and evaluate the effectiveness of its remediation efforts to prevent similar issues in future.
“Our intervention underscores our concern with the recurrent nature of Macquarie’s failures, which were caused by ineffective supervision and weak compliance and control management,” said ASIC commissioner Simone Constant.
Cautioning that a “comprehensive” response is needed to address the failures, Constant stressed “it cannot be a piece-meal or band-aid fix”.
“We were particularly disappointed that Macquarie failed to prevent 11 suspicious orders being placed on the electricity futures market via Macquarie terminals shortly after ASIC had referred similar failures to the Markets Disciplinary Panel which fined the bank just under $5 million,” the commissioner said.
ASIC’s action follows nine market conduct issues in 18 months, including misreporting over 375,000 OTC trades and failures in detecting suspicious futures trading. Some breaches went undetected for years, it said.
“Misreporting of OTC derivative transactions can undermine market transparency and hinders ASIC’s ability to monitor potential risks in Australia’s financial system,” Constant said.
“These licence conditions are necessary to give ASIC confidence the remediation will be effective and drive sustainable change.”
Late last year, in a parliamentary hearing, Joe Longo, chair of Australia’s corporate regulator, criticised Macquarie Bank for its “reckless” handling of suspicious futures trades executed on its platform.
Longo’s remarks came on the heels of the record $5 million fine imposed on the bank for failing to prevent these questionable orders, which raised serious concerns about compliance and market integrity.
Macquarie exhibited “a poor attitude to compliance”, Longo said before a parliamentary committee, emphasising that the bank did not adequately respond to warnings regarding the involvement of three clients in these trades.
“What was particularly significant, in my opinion, was not only the number of orders where this activity occurred or the fact that three clients of Macquarie were involved, it was how Macquarie handled the matter, the matter that was, in my view, of most concern,” Longo said.
“Those warnings were effectively ignored for too long. There were acknowledgments but there was no action. Macquarie failed to appreciate the seriousness of its obligations as a market participant.”
On Wednesday, Constant acknowledged that Macquarie has cooperated with ASIC throughout this process and has consented to the imposition of the additional licence conditions.
