Macquarie Bank faces ASIC administrative action based on compliance failures

According to ASIC’s media release, under the additional licence conditions, Macquarie needs to:

• provide a remediation plan tackling the compliance failures in their futures dealing business and OTC derivatives trade reporting functions, as well as the root causes of these issues
• retain an independent expert to review and report on whether the remediation plan has dealt with the failures and their root causes
• make the independent expert assess whether the bank’s remediation activities will be operationally effective in preventing, detecting, and responding to any similar future problems in its futures dealing and OTC derivatives businesses

“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,” Constant said in the media release.

ASIC said the bank’s issues relating to control management included deficient change management practices, unclear roles and responsibilities, and an imperfect understanding of its data governance processes and controls.

“Macquarie must take responsibility and put in place appropriate action to remediate the repeated failures and underlying governance and supervisory failures,” Constant said in the media release.

“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,” Constant added in the media release.

Constant noted that the bank has cooperated with ASIC in this administrative action and has agreed to the additional licence conditions.

ASIC’s past actions

ASIC shared that, in the past 18 months, it has identified or reported nine market conduct matters that were causing concern. According to ASIC:

• Seven matters pertained to false or inaccurate reports of over 375,000 OTC derivatives trade transactions, with many breaches going unnoticed for years
• Two matters aimed to prevent and detect futures dealing, suspicious trading, and the withholding of orders on the ASX 24 market

“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 in ASIC’s media release. “These licence conditions are necessary to give ASIC confidence the remediation will be effective and drive sustainable change.”