ASIC Continues Ongoing Fight with Malpractice in the Financial Markets

Market regulation operates on a self-regulatory model, leaving ASIC no choice but to play cat-and-mouse with market participants. With workload

asicThe latest Market Supervision Report conducted by ASIC, the Australian financial markets regulator, details the specific actions conducted by the agency in their attempt to supervise and regulate financial firms in Australia.

The 405 ASIC Supervision of Markets and Participants: January-June 2014 report published today paints a vivid picture of the day-to-day activities carried out by ASIC as the agency tries to reduce the amount of ‘breaches’ of Australia’s Corporations Act 2001 allowed by regulated firms.

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A statistical summary of ASIC’s activities in the first 6 months of 2014 include:

  • 5 significant enforcement outcomes
  • 8 infringement notices issued by the Markets Disciplinary Panel
  • 21 matters referred for further investigation
  • 17,091 trading alerts
  • 122 market inquiries
  • 35 risk-based assessment visits
  • 55 participant compliance reviews
  • 17 industry presentations.

Other Notable Highlights

The ‘ASIC Market Integrity Enforcement’ team typically had over 80 matters under investigation at any one time. As part of these investigations, ASIC conducted 66 formal interviews with persons of interest, issuing 326 notices to obtain information. The agency executed 4 search warrants in partnership with the Australian Federal Police.

ASIC Commissioner, Cathie Armour, praised the agency’s efforts saying, “The impact of ASIC’s early intervention program should not be underestimated.” Ms. Armour was also supportive of the self-regulatory model adopted by ASIC whereby financial firms are encouraged to regulate their own activities via clear guidelines and objectives prescribed by ASIC, adding, “By engaging with market participants about inappropriate conduct or poor compliance practices before they manifest in a breach, we can prevent potential damage to market integrity and consequential investor losses.”

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In terms of big scalps, the report mentions the recent enforcement outcome relating to Newcrest Mining for contravening its continuous disclosure obligations and leading to a $1.2 million penalty by the Federal Court. The report states the outcome was “significant for investor confidence” and currently stands as the highest civil penalty awarded in Australia for a continuous disclosure matter. The conviction was obtained just over 12 months after the relevant conduct occurred.

In her comments, Ms. Amour was keen to make Newcrest an example for the wider market saying: “The statement of facts in the Newcrest matter provides useful guidance for listed companies on the risks of selective disclosure and the care that needs to be taken when briefing analysts.”

The report also highlights ‘future areas of focus’ for the regulator for the forthcoming 6 months. The three stated areas of focus are correcting deficiencies in the treatment of confidential information by listed companies, suspicious activity reporting and execution of orders by designated trade representatives.

Online trading providers and financial brokers should take note of the latter as Managed accounts operated under Power of Attorney agreements by third parties has been a significant growth area for most FX and CFD brokers not just in Australia but worldwide. Money managers have become a staple feature of the retail trading industry assisted by effective technology and easier market accessibility. The popularity of managed accounts, ‘copy trading’ services, automated strategies, signals and social trading has risen significantly and it would appear that ASIC has not ignored this market trend.


Full text of ASIC’s Supervision of Markets and Participants: January-June 2014 report

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