Ascot Securities hit with infringement notice for 'serious failures'

Ascot Securities was issued an infringement notice by the Markets Disciplinary Panel (MDP) in November last year for serious failures, resulting in a $3.1 million penalty and a requirement to enter an enforceable undertaking. However, Ascot chose not to comply.

Shortly after the infringement notice was issued, Ascot ceased operating as a market participant. It has also surrendered its Australian Financial Services (AFS) licence and notified ASIC of its decision to be wound up.

The MDP had reasonable grounds to believe that Ascot had breached s798H(1) of the Corporations Act by repeatedly violating market integrity rules. These breaches included entering a client's orders onto the ASX that it should've suspected were manipulative and failing to report the client's suspicious trading activities to ASIC.

"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," ASIC deputy chair Sarah Court said.

The MDP deemed Ascot's entry of and failure to report suspicious orders as serious, attributing it to a broader failure in supervisory policies, procedures, and resources to identify and report suspicious trading by its clients.

The panel 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 considered them to be deficient. As a result, the MDP considered Ascot's conduct to be negligent.

According to the MDP, Ascot lacked the necessary supervisory policies, procedures, and technical resources to identify, prevent, and report suspicious orders and trading. Between January 2018 and January 2020, Ascot failed to report suspicious trading to ASIC on 115 occasions, despite concerns raised by its designated trading representatives.

The firm placed a particular client's orders onto the ASX 268 times over four months in 2020, where it should have suspected these orders would create an artificial price or a false appearance of active trading.

Following the resignation as an ASX market participant, effective 22 January 2024, Ascot informed ASIC of its decision to wind up. The enforceable undertaking would've required Ascot to engage an expert to review and enhance its supervisory policies, procedures, and resources.