ASIC has released its latest report on its market integrity operations for the period between 1 July and 31 December 2017. ASIC’s report covers their work in our financial markets, looking at client money, cyber resilience, sell-side research, financial benchmarks, binary option, and continuous disclosure.
In December 2017 ASIC released guidelines to improve the standards around sell-side research, including identifying and handling inside information by research analysts, the structure and funding of sell-side research terms, managing conflicts of interest at each stage of a capital raising transactions.
ASIC published an assessment of the National Stock Exchange of Australia Limited (NSX) listing standards. The report found that several changes needed to be made to improve compliance with its statutory obligations. Listings were identified that had a disproportionately large amount of trades occurring off-market after slight trading on the NSX.
Cyber resilience is regarded as one of the most significant concerns that are facing our economy and financial markets sector. ASIC released a report on the cyber resilience of firms operating in Australia’s financial market in November 2017, which analyses and collates the results of self-assessments of over 100 investment bankers, post-trade infrastructure providers, credit rating agencies, market operators, investment bankers and stockbrokers.
ASIC’s findings show greater engagement from firms on the issue, but there is a disparity between firms and insufficient investment in cyber resilient measures.
The report was designed to encourage behavioural changes and raise awareness of cyber risks by highlighting areas for improvement and good practices. ASIC also set out questions that should be asked by management and boards to better understand their organisation’s cyber preparedness.
Financial benchmarks are a crucial part of market integrity as they are used as a reference for a wide range of financial products. Manipulating the benchmarks can undermine reliability and damage the confidence and trust in Australia’s financial markets.
ASIC brought civil penalty proceedings against Australia and New Zealand Banking Group Limited (ANZ) and National Australia Bank Limited (NAB) in 2016 in relation to their role in setting the bill swap reference rate (BBSW). Both NAB and ANZ agreed to settle proceedings and the Federal Court imposed penalties of $10 million each on 10 November 2017 for attempting to engage in unconscionable conduct by trying to influence the BBSW.
ASIC accepted enforceable undertakings from NAB and ANZ on 20 November 2017 requiring them to make changes to their BBSW business with the assistance of ASIC appointed independent experts. NAB and ANZ have also agreed to make a community benefit payment of $20 million each to a financial consumer protection fund nominated by ASIC and pay an additional $20 million each towards ASIC’s investigations and other costs.
ASIC published details of their review into binary option trading apps in August 2017. The review identified over 330 apps that appeared to be unlicensed. Many of the app descriptions contained misleading statements about trading profitability and the amount of profit that could be made.
Jin Xi Li was charged with 88 insider trading offences in November 2017 following an ASIC investigation for trading in shares of PanAust Limited prior to a takeover bid on 30 March 2015. Each charge carried a maximum penalty of 10 years.
ASIC will continue to review technology and cyber resilience, conduct, and effective capital markets into 2018.