Sydney AFSL receives $3.1m penalty

Sydney AFSL Markets Disciplinary Panel private equity compliance

20 June 2024
| By Laura Dew |
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A Sydney-based subsidiary of a private equity firm has received an infringement notice for alleged serious failures, requiring it to pay $3.1 million and enter into an enforceable undertaking.

Ascot Securities, a subsidiary of a private equity firm Amalgamated Australian Investment Group (AAIG), saw an infringement notice published on the Markets Disciplinary Panel Outcome Register today. 

During the relevant times, Ascot was a small securities business with three directors and three designated trading representatives and no more than 20 employees which traded in non-complex products limited to listed securities. Crucially, it did not have a dedicated compliance team and relied on the wider AAIG team. 

The Markets Disciplinary Panel (MDP), a peer review panel which makes decisions about whether infringement notices should be given for alleged breaches of market integrity rules, alleged serious failures at the firm. 

It said it had reasonable grounds to believe that Ascot had contravened s798H(1) of the Corporations Act as a result of contravening the market integrity rules on numerous occasions, including by entering a client’s orders onto the ASX where it should have suspected the orders were manipulative and failing to report the client’s suspicious trading to ASIC.

The MDP considered Ascot’s entry of and failure to report suspicious orders was serious and the result of Ascot’s broader failure to have appropriate supervisory policies, procedures, and resources to identify and report suspicious trading by its clients.

The MDP also considered that the deficiencies in Ascot’s policies and procedures were exacerbated by its failure to review and update those policies despite senior compliance staff considering them to be deficient. As a result, the MDP considered Ascot’s conduct to be negligent.

On 24 November 2023, the MDP issued the infringement order which required Ascot to pay a penalty of $3.1 million and enter into an enforceable undertaking. The enforceable undertaking would have required Ascot engaging an expert to review its supervisory policies and procedures and organisational and technical resources, and make recommendations.

ASIC said the date for compliance with the infringement notice was 21 December, but Ascot decided not to do so. 

The firm has now ceased operating as a market participant, surrendered its Australian financial services licence, and informed ASIC it will be wound up. The licence was cancelled by ASIC on 19 January 2024.

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Submitted by Nathan Baker on Thu, 2024-06-20 11:56

That's great. If any loss had occurred and clients eventually sue, that will probably occur after the PI has lapsed. Advisers who did nothing wrong will get to pay for it. ASIC will have effectively done nothing proactively to prevent it but run up costs in order to prosecute and obtain the fine. Again Advisers who did nothing wrong will pay all the costs of that action, but the fine, if paid, will go to general revenue of the government. Then ASIC and every other voice out there with a vested interest to avoid responsibility or use it for marketing will lambast the adviser profession for somehow being responsible. I mean, we must be responsible because we're paying for it all. The whole regulatory system is corrupt and broken.

Submitted by JOHN GILLIES on Thu, 2024-06-20 12:23

(Where it should have considered the orders were manipulative).????"
You would need to be having breakfast with them.

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