Macquarie cops $35m fine for misleading conduct on millions of short sales

Macquarie Group has agreed to a $35 million fine after reaching a settlement with the corporate watchdog over misleading conduct relating to its failure to properly report at least 73 million short sales over 15 years.

The settlement with the Australian Securities and Investments Commission (ASIC) relates to legal action commenced in May this year and is still subject to court approval. Macquarie admits to multiple systems failures, many of which remained undetected for more than a decade.

Macquarie chairman Glenn Stevens, and chief executive Shemara Wikramanayake.

They include its failure to correctly report at least 73 million short sales between December 11, 2009, and February 14, 2024. ASIC said it is estimated that the group misreported as many as 1.5 billion short sales.

“Accurate and reliable data underpins confidence in our financial markets. ASIC and the market rely on short sale and regulatory reporting data – especially during periods of volatility – to understand market activity and make informed decisions,” ASIC chairman Joe Longo, said.

“Without accurate data, market transparency is undermined.”

Macquarie, which is worth more than $75 billion, reported a profit of $3.7 billion last year. The maximum penalty that could potentially have applied for the misconduct was as much as $782 million.

Macquarie, which is known as the “Millionaires’ Factory” over its high rewards for those who make money for the firm, was saved from hedge funds shorting its stock during the global financial crisis – and triggering a share plunge – when the government intervened and banned shorting of financial stocks.

The group said ASIC had acknowledged its full co-operation in relation to the short reporting investigation and the resolution of the proceedings.

“Macquarie seeks to uphold the highest standards in meeting the expectations of markets and regulators and recognises the role of transaction reporting in market confidence,” it said.

“Macquarie continues to invest in a broad range of programs to further improve systems and controls.”

The misreporting of short sales is not the only serious regulatory issue that has dogged Macquarie recently and led to questions about its corporate governance.

In April last year, the Federal Court hit Macquarie Bank with a $10 million fine over its failure to implement effective controls to prevent and detect unauthorised fee transactions on customer cash management accounts.

In September last year, ASIC’s Markets Disciplinary Panel (MDP) fined Macquarie Bank a record $5 million for failing to prevent suspicious orders being placed on the electricity futures market.

This May, ASIC imposed additional conditions on Macquarie Bank’s financial services licence after multiple and significant compliance failures relating to its futures dealing business.

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It triggered a humiliating first strike against its remuneration report in July as investors retaliated at the lack of repercussions when it came to executive pay.

Macquarie chairman Glenn Stevens, who is a former governor of the Reserve Bank, told investors at its July AGM that the board holds staff accountable.

He said pay penalties were imposed on various executives last financial year in response to ASIC’s imposition of licence conditions on the group.

The pay impacts of the ASIC short-selling legal action would be imposed in the current financial year, Stevens said.

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Macquarie acknowledged the fine in an announcement on Friday, saying it was investing in programs to improve its systems and controls.

“Macquarie seeks to uphold the highest standards in meeting the expectations of markets and regulators and recognises the role of transaction reporting in market confidence,” it said.

Macquarie is not the only Australian financial giant facing repercussions from recent misconduct.

On Friday, the Federal Court ruled to increase the fines imposed by ASIC on ANZ for multiple cases of misconduct over the past few years, with Justice Jonathan Beach increasing the penalties by $10 million to a total of $250 million.

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