ASIC identifies wholesale licensee shortcomings

Staff Writer

Financial Newswire

26 October 2022

The Australian Securities and Investments Commission (ASIC) has confirmed that it is overseeing remediation by wholesale licensees identified as part of its conflicts of interest and fixed income thematic reviews.

The regulator confirmed the remediations at the same time as releasing two reports on practices in wholesale financial markets.

ASIC said the reports had been developed against the background of the regulator having undertaken surveillances with the licensees reviewed representing “a significant share of the industry”.

“Where ASIC identified weaknesses or areas for improvement, the findings were raised with each licensee. ASIC has been overseeing remedial actions undertaken by these licensees to address the findings,” it said.

Releasing the two new reports REP 741 and REP 742, ASIC commissioner, Danielle Press said wholesale financial markets, including fixed income, currencies, and commodities markets were global, complex and rapidly evolving.

“Because these markets underpin growth in Australia’s real economy by providing financing to governments, financial institutions and corporates, misconduct can have wide-reaching impacts. As such, we have increased our focus on the conduct of participants in this sector,” she said.

Dealing with Fix Income, ASIC said it had reviewed nine market-making or facilitating dealers between 2019 and 2022 and identified a range of poor practices including a tick-box approach, not sufficiently identifying conduct risks and a lack of effectively designed controls.

It said that many dealers also had immature monitoring and surveillance systems, with some not recording voice communications and some only keeping records for short periods.

The ASIC reports did not attribute failings to any particular firms, but it named the companies covered by its review as being:

ANZ Banking Group

Bank of America, N.A, Merrill Lynch International and Merrill Lynch (Australia) Futures Ltd,

BNP Paribas,

Citibank, N.A. and Citigroup Global Markets Australia Pty Ltd.

CBA

FIIG Securities

NAB,

UBS AG

Westpac