Australia's financial watchdog has launched legal proceedings against Macquarie over allegations it misreported millions of short sales to market operators over a 14-year period, potentially distorting market data used by investors and regulators.

ASIC Sues Macquarie Securities for 14-Year Short Sale Reporting Failures

The Australian Securities and Investments Commission (ASIC) filed suit in the New South Wales Supreme Court, claiming Macquarie Securities (Australia) Limited (MSAL) failed to correctly report the volume of at least 73 million short sales between December 2009 and February 2024, with estimates suggesting the actual figure could reach up to 1.5 billion transactions.

This marks ASIC's fourth regulatory action against Macquarie Group in just over 12 months and comes amid growing scrutiny of compliance standards across Australia's financial sector.

“Accurate and reliable data underpins the integrity of, and confidence in, Australia's financial markets,” ASIC Chairman Joe Longo said in announcing the action. “Investors expect reliable information to analyze market movements and inform their investment decisions.”

Systemic Failures Distorted Market Data

The regulator alleges the misreporting stemmed from multiple systems-related issues that remained undetected for more than a decade, affecting data for at least 321 different securities. For each affected security, ASIC claims MSAL inflated or deflated the published volume of short sales by an average of approximately 12 percent, with some instances exceeding 50 percent.

Short sale reporting requirements were introduced following the 2008 Global Financial Crisis to enhance market transparency. The data helps investors, governments and regulators assess market sentiment and identify potential risks.

“We allege Macquarie's failures may have led to the financial services industry relying on misleading and false information for over 14 years,” Longo added.

The legal action also cites MSAL's failure to correctly report regulatory data for 633,680 orders submitted to market operators between November 2022 and March 2023.

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Compliance in Australia’s $541B Financial Sector

Macquarie Group, long nicknamed the “Millionaires' Factory” for its ability to generate substantial wealth for its executives and shareholders, reported a net profit of $3.7 billion in its most recent annual report. The firm stated that it “takes its compliance obligations very seriously and continues to invest in programs to further improve systems and controls across the group.”

ASIC is seeking penalties and an independent review of MSAL's regulatory reporting systems, controls and supervisory procedures.

The case highlights broader concerns about compliance within Australia's $541 billion financial sector. Just last week, ASIC imposed additional license conditions on Macquarie Bank Limited following what it described as more than a decade of compliance failures.

Other recent regulatory actions against Macquarie include a record $4.995 million fine imposed by ASIC's Markets Disciplinary Panel last September for failing to prevent suspicious orders in the electricity futures market, and a $10 million penalty ordered by the Federal Court in April 2024 for inadequate controls over unauthorized fee transactions.