In the red corner is Australia’s corporate regulator. In the blue corner is the so-called "millionaires' factory". At stake is the reputation of a prestigious investment bank which faces more allegations over its trading activities.
The Australian Securities & Investments Commission (ASIC) is suing Macquarie Group’s Macquarie Securities (Australia) Limited (MSAL) subsidiary, alleging it engaged in misleading conduct by misreporting short sales to the market operator.
In its fourth regulatory action against Macquarie in about a year, ASIC filed proceedings in the NSW Supreme Court, alleging between 11 December 2009 and 14 February 2024 MSAL failed to correctly report short sales volume by at least 73 million.
ASIC estimates that this could be between 298 million and 1.5 billion short sales, which refer to the practice of borrowing shares to sell them at market prices in the hope of buying them back at a lower price to lock in a profit.
ASIC is seeking unspecified penalties and an independent review and assurance of MSAL’s regulatory reporting (including short sale reporting) systems, controls and supervisory procedures to ensure compliance with the law.
ASIC Chair Joe Longo said Macquarie’s failures may have led to the financial services industry relying on misleading and false information for more than 14 years.
“MSAL’s repeated systemic failure to detect and resolve these issues indicated serious neglect of its systems and disregard for operational controls and technological governance," Longo said in a media release.
Informally called the "millionaires' factory" because of its huge senior management salaries, Macquarie responded by saying it had remediated the short sales reporting issues, that it had "self-reported" to ASIC and implemented additional controls.
It said MSAL was reviewing ASIC's claim and as the matter was before the court, it would be inappropriate to comment further.
“Macquarie takes its compliance obligations very seriously and continues to invest in programs to further improve systems and controls across the Group,” the investment bank said in a media release.
ASIC last week accused Macquarie of placing suspicious orders on the electricity futures market.
“Our actions reflect the ongoing and deep concerns we have about Macquarie Group and its weak remediation of long-standing issues, which led us to impose additional conditions on Macquarie Bank’s Australian Financial Services licence only last week,” Longo said.
At the time of writing Macquarie Group (ASX: MQG) shares were trading $3.03 (1.41%) lower at $212.27, capitalising the company at $80.92 billion.
