Market Integrity Update - Issue 116 - June 2020

Issue 116, June 2020

Former CEO and director of Sirtex Medical Limited sentenced for insider trading

Mr Gilman Edwin Wong, the former CEO and director of Sirtex Medical Limited (Sirtex), was sentenced to 18 months’ imprisonment after pleading guilty to insider trading. He was immediately released on recognisance of $10,000 to be of good behaviour for three years.

While in possession of inside information concerning Sirtex’s sales, Mr Wong sold 74,968 Sirtex shares on 26 October 2016 for an average price of $28.56 per share. The shares totalled $2,141,086.08.

Sirtex released a trading update on the ASX on 9 December 2016, downgrading its growth forecasts for the 2017 financial year in light of sales figures in the year to date period. Following the announcement, the opening price of Sirtex shares fell to $13.01, a decrease of approximately 49% from the previous day’s closing price of $25.49.

The value of the Sirtex shares, had they been sold at the volume-weighted average price (VWAP) on 9 December 2016, would have been $1,120,412.80.

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Retail OTC issuer’s licence cancelled

We’ve cancelled the Australian financial services (AFS) licence of retail over-the-counter (OTC) issuer Forex Capital Trading Pty Ltd (Forex CT).

Forex CT offered clients opportunities to trade in contracts for difference (CFDs) and margin foreign exchange (FX) contracts.

Our investigation found that Forex CT’s financial services business model disregarded key obligations of an AFS licensee and resulted in unconscionable conduct, misleading and deceptive conduct and a failure to manage conflicts of interest.

We also found that Forex CT:

  • lacked sound ethical values and judgement in dealing with clients
  • failed to ensure its representatives were adequately trained and complied with financial services laws
  • failed to ensure that financial services covered by its licence were provided efficiently, honestly and fairly.

CFDs and FX contracts are OTC derivatives that allow clients to speculate on the change in the value of an underlying asset. Our investigation identified a number of clients incurring large losses worth hundreds of thousands of dollars, including from their superannuation accounts, from investing in these products.

We continue to take strong regulatory action to protect consumers of retail OTC derivatives, using a range of regulatory tools.

We’re considering feedback on our proposals in Consultation Paper 322 Product intervention: OTC binary options and CFDs, where we consulted on making market-wide product intervention orders to address concerns about significant detriment to retail clients from trading OTC binary options and CFDs.

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Corporations urged to plan for LIBOR’s end

We recently wrote to a number of large corporations in Australia about the transition from LIBOR (London Inter-bank Offered Rate) to alternative reference rates (ARRs), highlighting the need to plan and encouraging them to start the transition early.

LIBOR is a widely used interest rate benchmark and is referenced in more than US$350 trillion worth of financial contracts globally. It’s expected that LIBOR will cease to be published after the end of 2021.

We recommend that corporations find out the extent to which their organisations are exposed to LIBOR and how the transition can affect their business. Conducting a LIBOR ‘stocktake’ and reaching out to banks and financial services providers are some of the recommended actions that will allow corporations to make informed decisions during the transition process.

Corporations are encouraged to find more information from industry-led groups such as the:

Our financial benchmarks webpage contains updates related to LIBOR transition in Australia.

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Wind-down of CME Australian derivative trade repository

We’ve been notified by Chicago Mercantile Exchange Inc. (CME) of their intention to wind down their Australian derivative trade repository (CME ADTR) by 30 November 2020 and request that reporting entities and vendors develop a transition plan.

The Abide Financial regulatory reporting business owned by the CME Group will also be wound down by 30 November 2020. In addition, CME Group is winding down its European Trade Repository and NEX Regulatory Reporting businesses, which may affect some multi-jurisdictional reporters.

We’ve engaged with CME and DTCC Data Repository (Singapore) Pte Ltd (DDRS), to understand their preliminary plans to help customers transition between licensed ADTRs and identify potential challenges. We’ll continue to have regular and ongoing engagement with both CME and DDRS to monitor these developments.

We’ll engage with CME ADTR, reporting entities and vendors during the six-month wind-down period to:

  • understand potential risks and issues
  • monitor the cut-over of reporting from CME to DDRS (or other prescribed repositories)
  • monitor the continuity and accuracy of OTC derivatives data.

In preparation for transitioning reporting to DDRS, we request that reporting entities and vendors develop a transition plan to be shared with ASIC on request to:

Email otcd@asic.gov.au for any inquiries or feedback.

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Ban on conflicted remuneration extended to LICs

Following Treasury’s public consultation earlier this year, the Government will remove the stamping fee exemption in relation to listed investment companies and trusts (LICs) from 1 July 2020.

Stamping fees are an upfront one-off commission paid to financial services licensees for their role in capital raisings associated with the initial public offerings of shares.

We’ll actively monitor arrangements in the lead-up to and following the introduction of these changes.

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Changing how you apply for a waiver from the market integrity rules 

We’re changing how applications for waivers from the market integrity rules are submitted. The ASIC Regulatory Portal (the portal) will replace the current submission channels as the primary method to submit these applications from 27 July 2020.

While the submission channel will change, our approach to assessing waiver applications will not. The portal will become your central point of access to our growing suite of regulatory services.

Anyone needing to use the portal to transact with us must register their own account. Selecting the ‘I just want to register’ tile on the registration page is an easy way to set up an account.

Benefits include:

  • structured online transactions with mandatory fields and questions that make it easier for you to provide ASIC with the information we require upfront
  • ability to attach supporting documentation
  • status tracking of your transactions and applications
  • ability to correspond with ASIC online about submitted transactions and applications
  • fee estimates automatically calculated based on the information provided in the transaction or application
  • online payment options for applications and some transactions and a record of invoice history.

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Moneysmart’s tips for trading in stressed financial markets

We’ve updated our Moneysmart content on choosing, buying and selling shares to help retail clients make informed trading decisions during periods of elevated market volatility and uncertainty.

The updated information highlights several considerations retail clients should be mindful of when trading in the current environment, including the implications of using certain order types and calculating share valuations.

These updates follow the recent publication of our Retail investor trading during COVID-19 volatility paper, which noted a substantial increase in retail investor activity across the securities market and greater exposure to risk during the COVID-19 pandemic.

We encourage market intermediaries with retails clients to visit Moneysmart and share this resource with their clients.

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Last updated: 22/09/2020 12:04