ASIC Pursues Macquarie Group Over Short-Sale Reporting Breaches | ASX 200 Banking Sector in Focus

Highlights:

• Macquarie Group Limited (ASX:MQG) faces court action for failure to disclose short sales over an extended period

• Australian regulator ASIC alleges systemic issues in short-sale reporting dating back more than a decade

• This marks the fourth regulatory enforcement move against Macquarie in the past year

Macquarie Group Limited (ASX:MQG), a major player in Australia’s diversified financials sector and a key component of the asx 200 index, is under renewed scrutiny following legal proceedings initiated by the Australian Securities and Investments Commission (ASIC). The regulator filed a case in the Supreme Court of New South Wales, citing the company’s repeated failure to meet mandatory short sale reporting obligations over a prolonged period.

ASIC alleges that Macquarie's failure to report short sales accurately affected a substantial volume of trades. These reporting lapses, which span multiple years, are said to stem from weaknesses in internal systems and oversight mechanisms.

Compliance Failures Traced to Systemic Issues

The allegations focus on misreporting linked to operational systems, with ASIC claiming the misconduct persisted undetected for a significant timeframe. The underreporting is said to be part of broader systemic shortcomings in Macquarie’s risk and compliance framework.

The regulator’s enforcement move underscores its ongoing concern over what it describes as longstanding governance failures at Macquarie Group. ASIC maintains that the reporting breaches reflect a disregard for legal obligations related to trade transparency and disclosure.

Historical Regulatory Context

Short selling involves the practice of selling financial instruments that the seller does not yet own. Though legal, this activity is heavily regulated due to its ability to influence market dynamics. Australian law mandates the reporting of such trades to ensure transparency.

Macquarie Group’s current legal challenge is particularly notable in light of its prior stance during the global financial crisis, when it supported restrictions on short selling. The bank was also among those temporarily shielded from short-seller targeting during that period.

Further Regulatory Pressures on Macquarie

This court action represents the fourth formal measure taken by ASIC against Macquarie within the past twelve months. Just days earlier, ASIC imposed additional licensing conditions on Macquarie Bank related to compliance breaches unrelated to the short-sale case.

In another instance, Macquarie received a significant penalty from ASIC’s markets disciplinary panel for failing to manage suspicious activity in electricity futures trading. The regulator also required the group to appoint an external reviewer to assess its trading and reporting practices for derivatives and futures contracts.

Macquarie’s Public Response

Macquarie Group stated that it first reported the short-sale reporting issue to ASIC in the latter part of 2022. A company spokesperson confirmed that the group is reviewing ASIC’s allegations and refrained from further comment due to ongoing legal proceedings.

The spokesperson also noted Macquarie’s continued efforts to improve compliance procedures and systems, indicating that internal reviews and upgrades are ongoing to strengthen its governance framework.

Despite heightened regulatory focus, the group recently disclosed solid financial results, with full-year earnings supported by diverse business operations. Macquarie also confirmed a slight reduction in the remuneration package of its chief executive for the fiscal year, reflecting updated performance metrics.

This development adds another layer of regulatory oversight for one of Australia's largest financial services institutions, further highlighting enforcement trends in the broader banking sector.