ASIC Market Supervision Update Issue 34

Other issues

ASIC warns financial services licensees of need for robust recruitment processes

ASIC recently reminded financial services licensees to ensure they have robust recruitment processes in place when appointing representatives who have worked for a business that ASIC has previously taken action against.

The warning followed recent ASIC action against licensees, including financial advisers and securities dealers, with ASIC becoming aware of their representatives having moved to new licensees.

Sydney-based Aliom Pty Ltd (Aliom) has been the latest securities dealer to downsize its business following ASIC's crackdown on representatives migrating from one licensee to another.

Aliom promoted managed discretionary account platforms and a range of investment education and financial markets trading and modelling tools to investors via a network of 29 corporate and individual authorised representatives in Queensland, New South Wales, Victoria and Western Australia.

An ASIC review of Aliom’s operations in 2012 found it had failed to comply with conditions of its Australian financial services (AFS) licence, in particular:

  • supervision and monitoring of authorised representatives
  • breach assessment and reporting processes
  • advice provided in relation to managed discretionary accounts, and
  • publication of promotional and marketing materials by representatives.

As a result of the review, Aliom has revoked the majority of its representative authorisations. The former representatives included those who had moved from licensees against whom ASIC had previously taken action.

ASIC reminds all licensees to review their current approach to appointing representatives and to make sure their processes are robust. Licensees need to have in place adequate compliance and governance standards, including being responsible for the conduct of the representatives they appoint.

Licensees must:

  • ensure migrating representatives are competent and adequately trained. It is important that they are effectively screened and their background checked
  • have adequate supervisory arrangements in place to identify and address deficiencies quickly, and
  • have adequate financial, technological and human resources to supervise and monitor new representatives, especially in cases of business growth.

 

Pre-trade transparency exceptions to come into effect

ASIC would like to remind market participants that new market integrity rules relating to pre-trade transparency exceptions come into effect on 26 May 2013. Rule 4.2.1 of ASIC Market Integrity Rules (Competition in Exchange Markets) was revised to introduce tiered thresholds for block trading, while the meaningful price improvement exception to pre-trade transparency replaces the ‘at or within the spread’ exception under Rule 4.2.3.

The revised Rule (Competition) 4.2.1 allows for a transaction to be executed without pre-trade transparency where the consideration for the transaction is not less than $1 million or more for Tier 1 products; $500,000 or more for Tier 2 products; and $200,000 or more for Tier 3 products.

The revised Rule 4.2.3 (Competition) requires below block trades executed without pre-trade transparency to offer meaningful price improvement. To meet the meaningful price improvement rule, the trade must be at a price that is:

  • higher than the Best Available Bid and lower than the Best Available Offer for the Relevant Product by one or more Price Steps (ticks); or
  • at the midpoint of the best available bid and best available offer (where midpoint = (best available bid + best available offer) ÷ 2).

The best available bid and best available offer are the highest pre-trade transparent bid and lowest pre-trade transparent offer available across all pre-trade transparent order books of licensed markets (also known as the national best bid and offer, or NBBO).

Participants should refer to Regulatory Guide 223 Guidance on ASIC market integrity rules for competition in exchange markets (RG 223) for guidance on complying with the new rules.

 

Former Bell Potter adviser sentenced for dishonest conduct

 

On 26 April, Lawson Stuart Donald, a former Bell Potter Securities adviser, was sentenced for dishonest conduct involving more than $1.7 million.

Mr Donald worked as a client adviser for the stockbroking company between 1 February 2003 and 21 April 2008. For three years, he dishonestly used his position as an employee of Bell Potter with the intention of directly or indirectly gaining an advantage for himself, or someone else, by rebooking share trades. 'Rebooking' is the transferring of trades from one client account to another client account. Mr Donald rebooked Mr Donald rebooked profitable share trades from a client account to two accounts controlled by him then sold those shares for a profit. Further, Mr Donald rebooked non-profitable share trades from the two accounts controlled by him to a client's account, thereby avoiding a loss.

Mr Donald pleaded guilty to one charge of dishonestly using his position as an employee with the intention of directly or indirectly gaining an advantage for himself or someone else, in August 2012.

He received a 2 year 6 month sentence, fully suspended upon entering a 2-year good behaviour bond.

ASIC Commissioner Greg Tanzer said, ‘ASIC will not tolerate unscrupulous financial advisers. This type of behaviour can erode investor and consumer confidence in financial services.’

 

Contact ASIC

 

Market participants should contact ASIC for market integrity issues and ASX and Chi-X respectively for operational issues. Contact ASIC’s Market and Participant Supervision group on 1300 029 454 and you will have these voice menu options:

  • Option 1 for real time market matters
  • Option 2 for other market related matters
  • Option 3 for Participant enquiries or matters
  • Option 4 for Market wide announcements.

Or you can reach the Market and Participant Team by email market.participants@asic.gov.au, or through your relationship manager.

 

For more information

 

Please see www.asic.gov.au/market-supervision.

Last updated: 30/03/2021 09:35