Macquarie Group has joined the big banks in being hit by a regulatory enforceable undertaking due to inadequacies within its wholesale foreign exchange unit.
The Australian Securities and Investments Commission on Friday said it had accepted an undertaking from Macquarie following an investigation that uncovered practices including staff disclosing confidential information to third parties on client trades and their identities.
In a statement, the corporate regulator expressed concerns that Macquarie's systems and controls were not adequate enough to supervise and monitor staff some of whom were engaged in inappropriate conduct.
ASIC said Macquarie's foreign exchange business "had the potential to undermine confidence in the proper functioning and integrity of the market".
"Macquarie employees inappropriately disclosed to external third parties confidential and potentially material information about Macquarie's trading activity associated with large pending AUD orders," the ASIC statement also noted.
"On a number of occasions, when the market approached the trigger price of a stop loss order, Macquarie spot FX traders responsible for managing the order traded in a manner that may have been intended to cause the trigger price to trade when it might not have traded at that time."
The EU focused on conduct at Macquarie between 2008 and mid-2013.
Commonwealth Bank of Australia, Westpac Banking Corp, National Australia Bank and ANZ Banking Group have all been subjected to similar EUs by ASIC in their foreign exchange divisions.
CBA and NAB traders were revealed to have front run orders on personal accounts and triggered client stop-loss orders.As part of the EU, Macquarie committed to develop a "program of changes" to its systems, controls, training, guidance and framework for monitoring and supervision of employees in its spot FX and other related businesses.
"The wholesale spot foreign exchange market is one the world's largest financial markets and the proper functioning of this market is of vital importance to the Australian economy," ASIC Commissioner Cathie Armour said.
"ASIC has now accepted undertakings from some of Australia's largest market participants to put in place forward looking processes and controls to ensure that their foreign exchange businesses provide financial services honestly, efficiently and fairly.
"ASIC will continue to ensure that there can be ongoing confidence in how our financial institutions conduct themselves now and into the future."
In a separate statement a Macquarie spokeswoman said the company "acknowledges ASIC's concerns relating to certain aspects of its wholesale Spot FX business, including systems, controls, training, guidance and framework for the supervision and monitoring of employees. Macquarie has commenced a program of work to address these concerns, which will be reviewed and assessed by an ASIC-appointed independent consultant."
"ASIC has acknowledged Macquarie's cooperation during the course of its investigation."
The EU extends over a three year period and ASIC will appoint an independent consultant to assess the program and its implementation. As part of the agreement with the regulator, Macquarie will also make a "community benefit payment" of $2 million to The Smith Family to support its financial services program.
That EU related to accusations of misclassification of clients, sloppy paperwork and rampant cheating on continuous professional development exams.
