One of Australia’s most prestigious investment banks has been accused of placing suspicious orders in the electricity futures market, after being admonished for the same behaviour previously.
The claim about Macquarie Group’s wholly-owned Macquarie Bank unit was made by the Australian Securities & Investments Commission (ASIC), which has slapped extra conditions on its Australian financial services licence (AFSL).
Macquarie, colloquially known as the Millionaire’s Factory for the wealth generated by it and the huge salaries of some of its employees, responded to the corporate regulator by acknowledging its announcement.
ASIC said it had imposed additional conditions on Macquarie Bank’s AFSL after multiple and significant compliance failures going back a decade, and related to its futures dealings and over-the-counter (OTC) derivatives trade reporting.
“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,” ASIC Commissioner Simone Constant said in a media release.
ASIC said the additional licence conditions would require Macquarie to:
- Prepare a remediation plan to address the failures in their futures dealing business and OTC derivatives trade reporting functions and their root causes
- Appoint an independent expert to review and report on the adequacy of Macquarie’s remediation plan to address the failures and their root causes, and
- Have the independent expert assess the operational effectiveness of Macquarie’s remediation activities to prevent, detect and respond to similar issues occurring in its futures dealing and OTC derivatives businesses in the future.
Nine market conduct matters of concern had been identified or reported in the last 18 months: seven related to the misreporting of more than 375,000 OTC derivative transactions, and two futures dealing matters concerning the prevention and detection of suspicious trading activity and the withholding of orders on the ASX24 market.
Constant said ASIC’s intervention underscored its concern about Macquarie’s recurrent failures, which were caused by ineffective supervision and weak compliance and control management.
Many OTC derivatives trade reporting breaches have continued for a number of years without detection.
The control weaknesses ranged from poor change management practices, unclear roles and responsibilities, and an incomplete understanding of its own processes and controls, including around data governance.
“The additional licence conditions are a significant administrative action to ensure Macquarie comprehensively addresses ASIC’s concerns. It cannot be a piece-meal or band-aid fix,” Constant said.
"Macquarie must take responsibility and put in place appropriate action to remediate the repeated failures and underlying governance and supervisory failures."
In a media release, Macquarie said it took its role as a licensed entity extremely seriously. It was working constructively with ASIC on remediation activities, and continued to strengthen its systems, controls and supervisory arrangements.
