CBA and NAB ‘Donate’ $5 Million to Settle ASIC Concerns Over Their FX Business

ASIC uncovered widespread compliance breaches within the questionable lenders’ offshore spot FX desks.

The Australian Securities and Investments Commission (ASIC) today accepted enforceable undertakings from two of Australia’s biggest banks, National Australia Bank Limited (NAB) and the Commonwealth Bank of Australia (CBA), following an investigation into the banks’ wholesale spot foreign exchange activities.

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NAB and the CBA failed to ensure that their systems and controls were adequate to handle inappropriate conduct after ASIC found that their traders shared confidential information about clients’ positions, while in other cases triggered their stop-loss orders.

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The watchdog has uncovered widespread and systemic compliance breaches within the questionable lenders’ offshore spot FX desks between January 2008 and June 2013, ASIC said on Wednesday. In particular, ASIC identified that on several occasions, NAB employees shared confidential information and entered offers into the trading platform without a legitimate reason. Furthermore, another employee disclosed specific confidential details of clients’ pending orders to external market participants and inappropriately exchanged material information about the bank’s client flow or proprietary positions.

ASIC also found widespread breaches in several key compliance areas among the CBA’s operations investigated. Most worrying were apparently the bank’s failure to prevent its staff’s attempts to manipulate the market, including by placing offers without a legitimate reason and attempts to influence benchmark rates, as well as disclosures of client confidential information.

As part of the settlement process, both banks have agreed to pay a combined $5 million as a “community benefit payment” to the Financial Literacy Australia, with the donation to be used to enhance programs of financial literacy education. Also, independent experts have been appointed to ensure that the changes the banks will make to their systems and controls in spot FX business are appropriate and adequate to effectively manage specified conduct risks.

ASIC Commissioner Cathie Armour commented: “A well-functioning foreign exchange market depends on all participants acting with integrity and fairness. ASIC is committed to ensuring that major financial institutions have in place effective mechanisms for ensuring that their employees are trained, monitored and supervised to provide financial services efficiently, honestly and fairly.”

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