Market Integrity Update - Issue 117 - July 2020
- Former Forex Capital Trading employee banned from providing financial services
- Societe Generale pleads guilty to client money offences
- Credit Suisse pays $75,000 infringement notice
- Equity market data methodology changes
- Changing how you apply for a waiver from the market integrity rules
Australian financial services (AFS) licensees are reminded to be more alert to the possibility of share sale fraud and account hacking throughout the COVID-19 pandemic.
Share sale fraud refers to the fraudulent activity of a person who is not who they claim to be, selling shares that do not belong to them. We continue to investigate and act on reports we’ve received of share sale fraud committed against AFS licensees.
We’ve previously provided guidance to AFS licensees on how they can mitigate these risks in Information Sheet 237 Protecting against share sale fraud (INFO 237). To help reduce the risk of fraudulent share sales, we encourage AFS licensees to review their arrangements including:
- one-off share sales
- customer due diligence
- ongoing customer due diligence
- client and payment verification processes
- off-market transfers
- third-party payment processes.
You may also wish to remind clients to change their passwords regularly and to be cautious when using public domain email addresses to communicate with their broker.
We encourage AFS licensees to report actual or attempted share sale fraud to ASIC, as these reports are critical to ensuring we can continue to take action.
- Read INFO 237
Former director and CEO of Quantum Resources Ltd (Quantum), Avrohom Kimelman, has been charged with insider trading offences.
Mr Kimelman has been charged with four counts of:
- procuring the acquisition of shares in Quantum while in possession of inside information
- applying for shares in Quantum while in possession of inside information.
Mr Kimelman was a director and chief executive officer of Quantum at the time he applied for and procured the acquisition of 3,957,150 Quantum shares between 13 April 2016 and 5 May 2016.
We allege that at that time Mr Kimelman was in possession of inside information about the intention by Quantum (now Nova Minerals Ltd) to acquire Manitoba Minerals Pty Ltd, which had agreed to acquire an interest in a lithium resource in Canada.
At the time of the alleged offences, each of the charges of insider trading carried a maximum penalty of 10 years’ imprisonment. In March 2019 the maximum penalty for insider trading was increased to 15 years’ imprisonment.
The matter has been adjourned to a committal mention hearing in the Melbourne Magistrates Court on 4 August 2020.
- Read the media release
We’ve banned Steven Marsh, a former employee of Forex Capital Trading Pty Ltd (Forex CT), from providing financial services for a period of three years.
Forex CT employed Mr Marsh as an account manager between 19 February 2018 and 20 March 2019. During this period, Mr Marsh engaged with clients to trade in contracts-for-difference (CFDs) and margin foreign exchange (FX) contracts.
In making the banning order, we found Mr Marsh:
- did not comply with financial services law
- was not adequately trained or was not competent to provide financial services
- was not a fit and proper person to provide financial services.
Mr Marsh was also found to have made misleading representations to clients, including advising clients they:
- would make profits trading with Forex CT when there were no reasonable grounds for making such representations, given that an investment in a CFD is a speculative, high-risk investment
- reduced the risk of incurring trading losses if they made increased deposits into their trading accounts, when in fact increased deposits would have the effect of placing more client money at risk.
We also found Mr Marsh engaged in unconscionable conduct, including engaging in high-pressure sales strategies and unfair practices in order to encourage clients to make deposits, or delay or cancel client requests to withdraw their own funds from their trading accounts.
- Read the media release
Societe Generale Securities Australia Pty Ltd (SGSAPL) has pleaded guilty to client money offences.
SGSAPL is the second company in Australia to face criminal prosecution for breaching client money provisions, which are designed to protect the interests of Australian financial services (AFS) licensee clients by ensuring that client money is kept in authorised accounts.
SGSAPL pleaded guilty to four separate counts, which occurred during specific time intervals between 8 December 2014 and 8 February 2017, specifically:
- two counts of breaching section 993B(1) by receiving money in connection with financial services, and then failing to pay that money into an account that satisfied the client money requirements within section 981B of the Corporations Act 2001.
- two counts of breaching section 993C(1) through making payments out of a client money account that were not permitted by regulation 7.8.02 of the Corporations Regulations 2001.
Each offence carries a maximum penalty of 250 penalty units (approximately $45,000).
These types of offences are regarded as serious misconduct and have been legislated in order to protect investors and enhance the confidence and integrity in Australia’s financial markets.
The matter has been listed for sentencing on 21 September 2020.
- Read the media release
Credit Suisse Equities (Australia) Limited (Credit Suisse) has paid a $75,000 penalty to comply with an infringement notice given by the Markets Disciplinary Panel (MDP).
The MDP had reasonable grounds to believe that Credit Suisse contravened Rule 3.3.1(b) of the ASIC Market Integrity Rules (ASX Market) 2010 and the ASIC Market Integrity Rules (Securities Markets) 2017, collectively known as the client instruction rules.
The MDP found the contravention of the client instruction rules was in relation to on-market buy-back activity where Credit Suisse did not act in accordance with the instructions of their clients, between 6 March 2017 to 8 November 2018.
Credit Suisse was engaged as a broker to conduct an on-market buy-back of shares on behalf of three clients. During this period of misconduct, Credit Suisse entered into a number of trades by matching orders on behalf of both its buying and selling clients rather than by matching orders on an order book. Credit Suisse reported these trades to the ASX as ‘trades with price improvement’ (NXXT trades).
The MDP considered that Credit Suisse had failed to act in accordance with its clients’ instructions to conduct an on-market buy-back when it had entered the NXXT trades.
The compliance with the infringement notice is not an admission of guilt or liability, and Credit Suisse is not taken to have contravened section 798H(1) of the Corporations Act.
- Read the media release
We’ve published updates to Information Sheet 177 Quarterly cash equity market data: Methodology and definitions (INFO 177), which outlines the methodology and definitions for collecting and aggregating equity market data.
The updates reference current regulations and ASIC market integrity rules and regulatory guides, as well as reflecting changes that we’ve made to streamline and simplify the calculation of these metrics. These include:
- market depth is now reported as the dollar value of the orders available at the best bid and offer prices, for easier interpretation
- the order-to-trade ratio metric has been updated to include ASX Centre Point orders and trades, to consistently report the ratio of dark orders and trades across exchange markets
- the large stocks group will consist of the largest 200 equity market products by average turnover, for consistency with other ASIC publications
- inclusion of all instruments that are defined as equity market products in ASIC Market Integrity Rules (Securities Markets) 2017.
Market participants are reminded that 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.
Applications will be submitted to ASIC through the portal using online forms known as transactions. We’ve recently published information about how transactions work in the portal, which is available on our applications for relief webpage.
Register on the portal now
Anyone needing to use the portal to transact with ASIC will need to register their own account.
Selecting the ‘I just want to register’ tile on the registration page is an easy way to setup an account. Your account will contain a record of all the transactions you submit on the portal.
You can invite others to act on your behalf in the portal. For example, you can authorise a trusted representative to launch and edit a transaction, but not submit it.