ASIC received 19,430 alerts of possible breaches from July to December 2012, down from 22,225 in the last reporting period. Eighty-six of these became market enquiries, but only 27 were referred to the enforcement team. This is down from the last reporting period, but up from the same time last year, which had 23 referrals.
The amount of insider trading and market integrity rules breaches were down, but market manipulation enquiries are going up. ASIC would not speculate on why this might be the case. The regulator also found market participants incorrectly issuing statements of advice, suggesting that the personal circumstances of the client were being considered when the advice was, in fact, only of a general nature. Advisers should also warn investors of misleading statements in advertising, such as one securities dealer that advertised share price targets that were unlikely to be reached.
The effect of high-frequency trading (HFT) is still a major concern for ASIC. In particular, wash trades – which occur when one account executes both sides of the trade – are a significant obstacle in maintaining fair and orderly markets, reported ASIC. Five HFT matters were referred to enforcement for formal investigation, and since the end of the reporting period, a dark pool-related matter has also been referred for formal investigation.
ASIC’s Senior Executive Leader of Market and Participant Supervision, Greg Yanco, made specific reference to the establishment of taskforces to consider issues relating to dark liquidity and HFT. “The work undertaken by these taskforces, as we foreshadowed in our last report, buttressed our surveillance and policy work.”
ASIC Deputy Chairman Belinda Gibson said, “ASIC continues to strengthen investor confidence in the integrity of our markets, as we refine our surveillance of Australia’s financial markets. ASIC has also significantly reduced the time taken to commence investigations into suspicious market conduct.
“Of the 138 market matters referred to ASIC’s enforcement team for investigations since ASIC assumed responsibility for market supervision in August 2010, 42 were made within 30 days of identifying the possible misconduct, and 93 were made in less than 60 days.”