The Market Disciplinary Panel (MDP) has given two infringement notices to Commonwealth Securities Limited (CommSec) which resulted in a total penalty of $700,000 and a voluntarily refund of $1.1 million in brokerage to over 25,000 clients.
The MDP believed that CommSec had contravened the rules that related to confirmations of transactions requiring disclosure in relation to crossing and trading as principal.
According to the MDP, failures to disclose crossings took place between August 2010 and February 2014, and included 114,841 confirmations, issued by CommSec, to retail clients whose orders were executed as crossings. However they did not contain the required statement that the transactions had involved a crossing.
As a result, the MDP fined CommSec with a penalty of $300,000 for the alleged contraventions, as it did not have adequate organisational and technical procedures in place that would verify the details of an issuer sponsored holding and whether they matched that of the client who had provided the instructions prior to submitting the orders for the sale of the holdings.
As far as the failures related to disclosure of trading as principal were concerned, they referred to the period between May 2011 and February 2014.
At that time, CommSec issued 50,848 confirmations to retail clients in relation to which it had entered into transactions as principal but which did not contain the required statement that CommSec entered into the transactions as principal and not as agent.
The MDP ordered a penalty of another $400,000 for these alleged contraventions and CommSec decided to voluntarily refund around $1.1 million in brokerage to more than 25,000 clients and notify another 48,205 clients of the lack of disclosure and said that it would provide corrective disclosure.
According to the Australian Securities and Investments Commission (ASIC), CommSec also co-operated throughout its investigation and did not dispute any material facts.
