Source : THE AGE NEWS
By Colin Kruger
Corporate regulator Joe Longo has accused Macquarie Group of complacency and hubris after suing the $82 billion financial giant for alleged misleading conduct over failure to report as many as 1.5 billion short sales over 15 years.
The Australian Securities and Investments Commission has taken legal action in the NSW Supreme Court alleging Macquarie failed to correctly report the volume of short sales by at least 73 million between December 2009 and February last year, affecting between 298 million and 1.5 billion short sales.
Macquarie Group chief executive Shemara Wikramanayake. The financial giant faces more action from the corporate regulator.Credit: Max Mason-Hubers
“We’ve been raising these issues with Macquarie since 2015, so I think complacency has crept into Macquarie, a hubris over their approach to compliance, and we’re taking that so seriously now that we have commenced this court case,” ASIC chairman Joe Longo said.
He pointed to problems with overseas regulators as an indication that there is a significant and group-wide compliance culture issue at Macquarie.
“We got assurances over the years that they dealt with their short-selling reporting problems, when in fact, they haven’t,” Longo said.
Short selling is a form of market trading that bets on falling share prices to make money.
The year Macquarie’s alleged misconduct is said to have begun, the group was still under the protection of ASIC, which had banned short sellers from targeting the investment bank and other financial stocks as they recovered from the 2008 global financial crisis. Macquarie, which had lobbied for the ban in 2008, was still allowed to short non-financial stocks.
Obligations to report on its shorting of other stocks, which Macquarie allegedly breached, were designed to enhance public transparency of short-selling activity following the market volatility during the financial crisis. It is possible Macquarie never complied with some of them, according to ASIC.
This is ASIC’s first short-sale reporting case. The financial regulator alleges the misleading conduct was due to multiple systems-related issues, many of which remained undetected for over a decade.
“[Macquarie’s] repeated systemic failure to detect and resolve these issues indicated serious neglect of its systems and disregard for operational controls and technological governance,” it claims.
ASIC chair Joe Longo: “We’ve been raising these issues with Macquarie since 2015.”Credit: Justin McManus
Treasurer Jim Chalmers said he supported the latest action by ASIC in making sure everybody was “playing by the rules” in the economy.
ASIC declined to say what penalties could apply, but under Section 1317G of the Corporations Act, a maximum penalty of $782.5 million could be imposed.
Wednesday’s announcement marks the fourth regulatory action ASIC has taken against Macquarie Group in just over 12 months.
Last week, the regulator slammed Macquarie for “multiple and significant” compliance failures, forcing the financial giant to appoint an independent expert to review its futures dealing business and over-the-counter derivatives trade reporting.
That move came after ASIC’s markets disciplinary panel fined Macquarie a record $4.9 million for failing to prevent suspicious orders being placed on the electricity futures market in September 2024.
Macquarie reported $3.7 billion in full-year profits on Friday, and revealed that chief executive Shemara Wikramanayake’s pay for the full year dropped to $24 million, from $25.3 million the previous year.
Macquarie said it reported the latest matter to ASIC in late 2022 when the issue came to its attention, and was now reviewing ASIC’s claim, but as the matter is before the court, it would be inappropriate to make further comment.
“Macquarie takes its compliance obligations very seriously and continues to invest in programs to further improve systems and controls across the group,” a spokesperson said.
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