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19-344MR Pershing Securities Australia charged with breaching client money obligations and accepts additional licence conditions
Pershing Securities Australia Pty Ltd (PSAL), has been charged with two counts of failing to pay client money into an account and one count of failing to comply with requirements relating to a client money account.
The matter was listed for first mention today in the Downing Centre Local Court in Sydney.
ASIC alleges that between June 2016 and December 2018, PSAL failed to comply with client money obligations in contravention of criminal offence provisions under sections 993B(1) and 993C(1) of the Corporations Act 2001 (the Act).
Under section 981A(1) of the Act ‘Client Money’ is:
- money paid to a financial services licensee in connection with a financial service that has been provided, or will or may be provided, or
- money paid to a licensee in connection with a financial product held by a person.
Under s981B(1) of the Act, an Australian financial services (AFS) licence holder must ensure that client money is paid into a client money account. An AFS licence holder is only permitted to make payments out of a client money account as specified by the Corporations Regulations.
The maximum penalty for each of the charges for a body corporate is 250 penalty units (approximately $45,000).
The Commonwealth Director of Public Prosecutions is prosecuting the criminal charges.
The matter has been adjourned until 4 February 2020.
Separately, PSAL has accepted additional licence conditions imposed by ASIC on the AFS licence of PSAL.
The additional conditions require PSAL to appoint an independent expert to conduct a review to assess and report on whether PSAL has the current and ongoing ability to comply with the client money requirements of the Act. Where necessary, the expert will identify remedial actions and PSAL must provide ASIC with a plan identifying the remedial actions it proposes to implement.
PSAL is also required to provide ASIC with attestations from a Senior Executive and non-executive board member within PSAL. The Senior Executive must confirm that PSAL has taken all reasonable steps to identify and remediate all client money related breaches identified between December 2017 and the date of the attestation.
If remedial actions are necessary, PSAL is also required to withhold any bonuses payable to the PSAL Senior Executive with primary responsibility for implementing any required remedial action, until PSAL believes the remedial action has been fully and satisfactorily completed.
The additional conditions have been imposed on AFS licence 338264.
PSAL is an ASX and Chi-X market participant providing execution, clearing and settlement services to other financial intermediaries and their end clients. PSAL also provides third-party clearing and settlement services to other ASX and Chi-X trading participants, which includes holding the trading participants’ client monies and handling client property.
Client money provisions protect the interests of clients of AFS licensees by separating client money from money belonging to licensees.
The criminal matter was adjourned on the 4 February 2020 in the Downing Centre Local Court in Sydney until 17 March 2020 for further mention.
Editor's note 2:
On 17 March 2020, the matter was adjourned until 5 May 2020 for further mention.