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Monday 21 November 2016

16-399MR ASIC commences civil penalty proceedings against State One Stockbroking Ltd for failure to comply with market integrity rules

ASIC has commenced civil penalty proceedings against State One Stockbroking Ltd (State One) in the Federal Court of Australia in Perth for failing to comply with two ASIC Market Integrity Rules (ASX Market) 2010 (MIRs), following State One's failure to comply with an infringement notice given to it by the Markets Disciplinary Panel (MDP). 

ASIC alleges that State One:

  • made Bids on behalf of a client on 1 and 2 March 2011 in circumstances in which it ought reasonably have suspected that the client placed the relevant orders with the intention of creating a false or misleading appearance with respect to the market for, or price of, a stock; and
  • failed, between 10 February and 9 May 2011, to provide clear guidance to its employees responsible for reviewing post-trade alerts on what to do in the event of receiving post-trade alerts.

ASIC is seeking:

  • declarations that State One contravened subsection 798H(1) of the Corporations Act;
  • orders that State One pay pecuniary penalties to the Commonwealth; and
  • to recover its legal costs should it be successful in the proceedings.

The matter has been set down for a Case Management Conference on 1 December 2016.

Background - MDP decision

The MDP gave an infringement notice to State One on 31 March 2016 for failing to comply with the MIRs.  State One did not comply with the infringement notice. 

The MDP found that it had reasonable grounds to believe that State One contravened subsection 798H(1) of the Corporations Act by reason of contravening MIR 5.7.1(b)(iii) and MIR 5.5.2(b).  The MDP specified a total pecuniary penalty of $425,000 in the infringement notice, being comprised of $275,000 in relation to MIR 5.7.1(b)(iii) and $150,000 in relation to MIR 5.5.2(b).

The MDP was satisfied that State One:

  • made Bids on behalf of a client on 1 and 2 March 2011 in circumstances in which it ought reasonably have suspected that the client placed the relevant orders with the intention of creating a false or misleading appearance with respect to the market for, or price of, a stock; and
  • failed, between 10 February and 9 May 2011, to provide clear guidance to its employees responsible for reviewing post-trade alerts on what to do in the event of receiving post-trade alerts

The giving of an infringement notice to State One is only an allegation that State One has contravened subsection 798H(1) of the Corporations Act.  State One is not taken to have contravened subsection 798H(1) of the Corporations Act. ASIC cannot enforce an infringement notice, but it may bring civil penalty proceedings against the recipient of an infringement notice if the recipient does not comply with the infringement notice.

Since August 2010 the MDP has issued 51 infringement notices in relation to alleged contraventions of the market integrity rules of which 50 have been complied with, the remaining notice being that issued to State One.

Editor's note:

The hearing of the proceedings commenced on 17 September 2018, and at the parties’ request the hearing was adjourned on 18 September 2018. The matter is listed for hearing on the making of declarations of contravention and pecuniary penalty orders in the Western Australian Division of the Federal Court on 20 November 2018.

Last updated: 30/03/2021 09:27