CommSec and AUSIEX receive combined $27.1m penalty
The Federal Court has ordered Commonwealth Securities (CommSec) and Australian Investment Exchange (AUSIEX) to pay $20 million and $7.12 million respectively for breaches of the Market Integrity Rules.
The penalty was the largest-ever penalty handed down for breaches of the Market Integrity Rules.
The court issued the penalty for breaches of the Market Integrity Rules, Corporations Act and ASIC Act (CommSec only) for systemic compliance failures including overcharging brokerage fees to CommSec customers on over 120,000 occasions, totalling over $4.3 million.
ASIC deputy chair, Sarah Court, said: “It is essential that market participants have appropriate systems, governance and controls in place to ensure they meet their obligations to both their customers and the financial markets in which they operate. CommSec and AUSIEX both demonstrated widespread, systemic compliance failures over a nine-year period. CommSec’s failures also resulted in millions of dollars being overcharged to customers.
“When market participants fail to comply with the Market Integrity Rules, they undermine the integrity of Australia’s financial markets. As today’s decision demonstrates, the penalties for engaging in this conduct are significant. ASIC will continue to take action and seek significant penalties where market and trading participants fail to comply.”
The Court also ordered an independent review and assessment of all systems and controls relating to the provision of financial services by CommSec and AUSIEX, along with a review of the remediation undertaken by the entities.
The Court declared that CommSec and AUSIEX contravened the Market Integrity Rules on multiple occasions, including when:
- CommSec overcharged brokerage fees to customers on 120,933 occasions, totalling over $4.3 million;
- CommSec and AUSIEX failed to comply with client money reconciliation requirements;
- CommSec and AUSIEX did not provide accurate confirmations to customers for certain market transactions;
- CommSec did not have appropriate system filters to detect possible trades where there would be no change of beneficial owner (known as wash trading);
- CommSec and AUSIEX failed to comply with their best execution policies and procedures;
- CommSec failed to enter into the required warrant agreement forms with clients and provide an explanatory booklet before accepting an order from a client to purchase a warrant on the market for the first time; and
- CommSec and AUSIEX failed to include the required intermediary identification in regulatory data submitted to relevant market operators.
The Court also declared that CommSec and AUSIEX failed to do all things necessary to ensure its financial services were provided efficiently, honestly and fairly.
The Court acknowledged CommSec and AUSIEX’s early admissions and co-operation in this matter.
AUTHOR
Laura Dew
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Sarah Court: “When market participants fail to comply with the Market Integrity Rules, they undermine the integrity of Australia’s financial markets."
I wonder what made her come to that conclusion? It's a brilliant deduction by the ASIC deputy chair, anyway. LOL