Advisory firm hit with trading penalty
The Australian Securities and Investments Commission (ASIC) has announced Wilsons Advisory and Stockbroking Ltd has paid a penalty of $548,328 after receiving an infringement notice from the Markets Disciplinary Panel (MDP).
Under Rule 6.1.1, trades in equity markets products were required to be matched on an order book of a market and have pre-trade transparency.
After conducting a thematic review of Trade with Price Improvement (TWPI) reported by market participants, ASIC raised concerns over a “significant number” of transactions reported by Wilsons as TWPI from 1 March 2022 to 21 March 2022.
According to the corporate regulator, the transactions “did not appear to offer price improvement”.
ASIC contacted Wilsons in March 2022, receiving a response in the following month (8 April).
Wilsons acknowledged it did not have a “specific post-trade alert” in place to identify the issue, which had as a result, gone undetected.
The MDP subsequently found that Wilsons executed 2,306 trades away from an order book, incorrectly reporting them as TWPI.
Accordingly, MDP deemed it had reasonable grounds to believe that Wilsons contravened subsection 798H(1) of the Corporations Act 2001 by failing to comply with Rule 6.1.1 on 2,306 occasions during the period between 1 January 2020 and 31 March 2022.
The MDP described the breaches as “serious, and at the high end of careless”, rather than as “reckless or intentional”.
According to the MDP, Wilsons was “overly reliant on the knowledge of its designated trading representatives” (DTRs) as a control, and should have had “more robust risk management systems in place” either to prevent or detect the breaches.
However, the MDP considered that Wilsons “generally had a sound compliance culture”, with the firm taking “swift action” to investigate the conduct after being notified.
Wilsons also reportedly took remedial steps to ensure the conduct would not re-occur by exploring additional internal systems controls with its surveillance service provider.
A TWPI was defined as a transaction that is executed at a price step both higher than the best available bid price and lower than the best available offer price.
It could also be a transaction executed at the mid-point of the best available bid price and the best available offer price.
According to ASIC, trades that arose from orders that were displayed on-market “foster competition”, which promoted liquidity and price formation. This benefited all investors and enabled listed companies to value their assets.
However, TWPIs were a specified exception to this requirement, given they provided a “meaningfully better price” for investors to trade than what was displayed on-market.
AUTHOR
Charbel Kadib
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