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Wilsons Advisory and Stockbroking (Wilsons) has paid a Markets Disciplinary Panel (MDP) penalty of $548,328 for failing to comply with Market Integrity Security Rules.
Announced today by the Australian Securities and Investments Commission (ASIC), the half-a-million-dollar fine relates to Wilsons’ non-compliance with trading rules following the watchdog’s review of Trade with Price Improvement (TWPI) transactions.
TWPI is one of the specified exceptions under ASIC regulations that otherwise requires trades in equity market products to be matched on an order book of a market and have pre-trade transparency.
This type of transaction is executed at a price step that is both higher than the best available bid price and lower than the best available offer price. It can also be a transaction that is executed at the mid-point of the best available bid price and the best available offer price.
According to ASIC, trades that arise from orders that are displayed on-market foster competition and promote liquidity, which ultimately benefits investors and supports listed companies to value their assets.
TWPIs are specified exceptions to this requirement because they provide a meaningfully better price for investors to trade than what is displayed on-market.
Wilsons - a 125 year old company with more than $30 billion in funds under management and a national presence - was alleged to have completed a ‘significant number’ of transactions in March 2022 that were reported as TWPI but did not appear to offer price improvement.
According to ASIC, Wilsons responded to the watchdog stating that it did not have a specific post-trade alert in place to identify this issue, which is why it went undetected.
“The MDP found that Wilsons executed 2,306 trades away from an order book and reported those trades as TWPI in circumstances where it was not permitted to do so as the trades did not provide price improvement over the best available bid price and the best available offer price,” ASIC said.
“The MDP characterised Wilsons’ conduct as serious, and at the high end of careless rather than as reckless or intentional.
“Wilsons was not aware of the issue, which had gone undetected for over two years until ASIC brought it to Wilsons’ attention. The MDP considered that the fact that the conduct went undetected for over two years was an aggravating factor.”
Further, the disciplinary panel considered that the stockbroker was ‘overly reliant’ on the knowledge of its designated trading representatives (DTRs) as a control, and should have had more robust risk management systems in place.
“Nonetheless, the MDP considered that Wilsons generally had a sound compliance culture,” ASIC said.
“Wilsons took swift action to investigate the conduct after being made aware of it by ASIC, co-operated with ASIC and undertook a thorough review of its trading history to identify the breaches and submit a breach report to ASIC.
“Wilsons also took remedial steps to ensure that the conduct does not re-occur by exploring additional internal systems controls with its surveillance service provider, retraining its DTRs and conducting individual training sessions with DTRs and sales traders about the pre-trade transparency requirement.”
The watchdog added that compliance with the fine was not an admission of guilt or liability on Wilsons’ behalf, and the firm was not taken to have contravened any subsections of the Corporations Act.
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