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Highlights

  • ASIC alleges Macquarie Securities misreported up to 1.5 billion short sales over 14 years.

  • Failures stemmed from systemic issues that went undetected for more than a decade.

  • This is the fourth regulatory action against the Macquarie Group in the past year.

The Australian Securities and Investments Commission (ASIC) has launched legal proceedings against Macquarie Securities (Australia) Limited (MSAL), alleging that the firm engaged in misleading conduct by misreporting millions of short sales to the market operator over a 14-year period.

In documents filed with the New South Wales Supreme Court, ASIC claims that between December 11, 2009, and February 14, 2024, MSAL failed to accurately report at least 73 million short sales. However, the total number of misreported sales could be significantly higher, with ASIC estimating the actual figure to fall between 298 million and 1.5 billion.

This marks ASIC’s first court action relating to short sale reporting since regulations were introduced in 2009 in the wake of the Global Financial Crisis. The data is crucial for market transparency, enabling regulators, investors, and financial institutions to gauge market sentiment and detect misconduct. ASIC asserts that the misreporting undermined confidence in the financial system.

ASIC Chair Joe Longo emphasized the seriousness of the case: “This action is timely given the recent global market volatility. Accurate and reliable data underpins the integrity of Australia’s financial markets. Investors expect trustworthy information to analyse market movements and make informed decisions.”

According to ASIC, the misleading conduct was largely the result of long-standing systems-related issues within MSAL, many of which went undetected for over a decade. A review of the firm’s short sale reporting systems in 2020—triggered by issues identified in both 2015 and 2019—failed to rectify the problems. ASIC alleges this points to a serious lack of technological oversight and operational governance at the company.

In addition to short sale misreporting, MSAL is accused of failing to accurately report Regulatory Data for over 633,000 trade orders submitted to the market operator between November 2022 and March 2023.

“This is not an isolated issue,” Longo added. “It is the fourth enforcement action ASIC has taken against Macquarie Group in just over a year. Our actions reflect deep and ongoing concerns about Macquarie’s failure to address persistent compliance weaknesses.”

Last week, ASIC imposed additional conditions on the Australian Financial Services (AFS) licence held by Macquarie Bank Limited, citing more than a decade of compliance shortcomings.

As part of the current proceedings, ASIC is seeking not only penalties but also an independent review of MSAL’s regulatory reporting systems. This includes an assurance that controls, procedures, and oversight frameworks meet legal standards and adequately support regulatory compliance.