Retail broker Openmarkets has paid a fine of $4.5 million – the largest ever penalty imposed by ASIC’s Markets Disciplinary Panel – for breaching multiple market integrity rules over several years.
In a media release from ASIC on Thursday, the MDP said it would have imposed a significantly higher fine; however, it reduced the total amount due to several factors, including Openmarkets entering an enforceable undertaking to comply with an MDP infringement notice and not contesting the alleged contraventions.
In establishing the level of the fine, ASIC noted Openmarkets had a history of compliance failures, including a $200,000 fine in 2017 for breaching the market integrity rules of both the ASX and Chi-X Australia.
The regulator also banned Openmarkets’ former acting head of trading, Virginia Owczarek, from providing any financial service for three years after finding that she accepted a $2,000 payment from a client for stock tips and engaged in “inappropriate and unprofessional communications”.
“This outcome sends a clear message to market participants that breaches of market integrity rules will result in substantial penalties that should not be seen as a cost of doing business,” ASIC said.
The MDP had “reasonable grounds” to believe Openmarkets was aware the same price orders were likely to have the effect of creating an artificial trading price or a false or misleading appearance of active trading.
Additionally, the company had insufficient staff with the appropriate skills, knowledge, and experience to conduct effective trade surveillance.
Senior staff were found to have not only warned ASIC about potential breaches from clients, but also informed clients they triggered market abuse detection software without escalating the issue through internal compliance channels, which the MDP described as “highly unprofessional and an aggravating factor”.
Openmarkets boasts $3 billion worth of trades monthly, including from 300 private wealth advisers, offering white-labelled advice software.
ASIC’s investigation commenced after routine surveillance identified repeated suspicious trading by a client of the broker who had placed a simultaneous bid and ask orders in the same security and at the same price on 2011 occasions.
“Many of these suspicious orders formed part of an unusual series of orders involving the rapid cancellation or amendment away from priority of large volume orders,” ASIC said.
The regulator noted the same client as being responsible for suspicious trading resulting in the 2017 infringement notice.
The enforceable undertaking requires Openmarkets to appoint an independent expert to assess, report on, and identify any necessary remedial actions relevant to the adequacy of Openmarkets’ organisational and technical resources and the design and operational effectiveness of its arrangements, relating to trade surveillance, client onboarding, and client money.
In a media statement, Openmarkets said it has since undergone a significant strategic and operational transformation, with the business “doubling down” on its B2B product capabilities and client base. It has also appointed a new leadership team to deliver on its strategy.
The broker said it has also commissioned, of its own accord, an independent review of the design of its trade surveillance systems in 2021 and has hired trade surveillance experts to work within its compliance team.
“Openmarkets today is a very different business than it was in the period when the above conduct occurred,” the firm said.
