Failures see ASIC hit Macquarie Bank with license conditions

The Australian Securities and Investments Commission (ASIC) has imposed additional conditions on Macquarie Bank’s Australian Financial Services License over what it calls significant compliance failures – “some going undetected for many years and one for a decade”.

The regulator said the compliance failures relate to Macquarie’s futures dealing business and its over-the-counter (OTC) derivatives trade reporting.

The additional licence conditions will require Macquarie to:

• prepare a remediation plan to address the failures in their futures dealing business and OTC derivatives trade reporting functions and their root causes
• appoint an independent expert to review and report on the adequacy of Macquarie’s remediation plan to address the failures and their root causes, and
• have the independent expert assess the operational effectiveness of Macquarie’s remediation activities to prevent, detect and respond to similar issues occurring in its futures dealing and OTC derivatives businesses in the future.

ASIC Commissioner Simone Constant said, “Our intervention underscores our concern with the recurrent nature of Macquarie’s failures, which were caused by ineffective supervision and weak compliance and control management.”

The control weaknesses ranged from poor change management practices, unclear roles and responsibilities, and an incomplete understanding of its own processes and controls, including around data governance.

“The additional licence conditions are a significant administrative action to ensure Macquarie comprehensively addresses ASIC’s concerns. It cannot be a piece-meal or band-aid fix,” Constance said

“Macquarie must take responsibility and put in place appropriate action to remediate the repeated failures and underlying governance and supervisory failures.”

“We were particularly disappointed that Macquarie failed to prevent 11 suspicious orders being placed on the electricity futures market via Macquarie terminals shortly after ASIC had referred similar failures to the Markets Disciplinary Panel which fined the bank just under $5 million.”

ASIC’s administrative action follows the identification or reporting of nine market conduct matters of concern in the last 18 months – seven matters relating to misreporting of more than 375,000 OTC derivative transactions, and two futures dealing matters concerning the prevention and detection of suspicious trading activity and the withholding of orders on the ASX24 market.