The Markets Disciplinary Panel (MDP) issued an infringement notice to Ascot Securities Pty Ltd (Ascot) on 24 November 2023 for serious failures, requiring it to pay a penalty of $3.1 million and enter into an enforceable undertaking.
The date for compliance with the infringement notice was 21 December 2023. Ascot elected not to comply.
Ascot ceased operating as a market participant shortly after the infringement notice was issued. Ascot has surrendered its Australian Financial Services (AFS) licence and has informed ASIC it will be wound up.
The MDP 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.
ASIC Deputy Chair Sarah Court said, ‘ASIC takes seriously the requirements for market participants to identify, prevent and report suspicious trading to ASIC, which is fundamental to ensuring the integrity of our markets. The MDP found that there were significant deficiencies in Ascot’s compliance with these requirements over a significant period.’
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.
The MDP was satisfied that:
Ascot did not have the necessary supervisory policies and procedures and organisational and technical resources to identify, prevent and report suspicious orders and suspicious trading.
Ascot entered a particular client’s orders onto the ASX on 268 occasions over a four-month period in 2020 where Ascot should have suspected the orders were likely to have the effect of creating an artificial price or a false or misleading appearance of active trading in those securities.
Despite its designated trading representatives (DTRs) raising concerns about the client’s trading, Ascot failed to report the suspicious trading to ASIC on 115 occasions from 15 January 2018 to 31 January 2020.
Ascot elected not to comply with the infringement notice and applied to cancel its AFS licence on 22 December 2023. The licence was cancelled by ASIC on 19 January 2024.
Ascot resigned as an ASX market participant which the ASX approved effective 22 January 2024 and has informed ASIC it will be wound up.
The enforceable undertaking would have involved Ascot engaging an expert to review its supervisory policies and procedures and organisational and technical resources and make recommendations.
The giving of an infringement notice is only an allegation that the recipient has contravened s798H(1) of the Corporations Act and the recipient is not taken to have contravened s798H(1).