CBA broking arm Commonwealth Securities tops fines list
The Australian12:00AM December 28, 2016
Ben Butler
Commonwealth Bank’s broking arm Commonwealth Securities racked up almost half the fines imposed on stockbrokers this year, an analysis of Markets Disciplinary Panel rulings shows.
Commonwealth Securities topped the bad brokers list with fines totalling $900,000 for three breaches, out of total fines levied of $1.7 million.
And its misdemeanours, which included allowing trading by an account belonging to a client who had died, pushed this year’s total fines to close to double 2015’s $905,000.
Macquarie Securities was the only repeat offender on this year’s list, racking up a $120,000 fine to match last year’s $110,000 impost.
Made up of senior stockbroking executives, the Markets Disciplinary Panel hands out infringement notices as an alternative to the Australian Securities & Investments Commission launching legal proceedings against arrant brokers.
It took over from a disciplinary tribunal run by the ASX in 2010, when ASIC assumed control of markets supervision.
CBA’s unwelcome place at the top of the panel’s league table follows a series of scandals at Australia’s largest bank, which this year saw its life insurance arm CommInsure rocked by accusations that some insurance claims were wrongly refused. It also faced allegations that doctors were pressured on assessments while payouts to the terminally ill delayed.
All of the breaches considered by the panel this year took place in previous years, with the most recent being a failure to vet orders by Credit Suisse in 2015 that resulted in share price spikes, for which the broker was fined $74,000.
Perth-based State One Stockbroking scored the biggest single hit, of $425,000, for failing to detect a client ramping the stock of biotech minnow Tissue Therapies, now known as Factor Therapeutics, in 2011.
State One, run by veteran Alan Hill, did not comply with the panel’s ruling, resulting in ASIC launching civil action against it in the Federal Court last month.
In addition to its infringement notice for allowing an account belonging to a dead client to trade, Commonwealth Securities was pinged for failing to tell 110,000 customers that trades were “crossings”, executed within the broker without going to the market, and failing to verify client identification.
CBA was fined $700,000 for the breaches, which it said were “historical process issues” that did not cause any client losses.
It was ordered to pay $200,000 for the breach involving the dead client, which occurred between March and October, 2014. The panel found the broker received a death certificate on March 25, 2014, but failed to lock the relevant CommSec accounts. A family member then logged into the accounts and performed trades.
In October 2014 CBA discovered the problem, along with a number of other accounts belonging to clients who had died, that accidentally had been left unlocked following a restructure. CBA said it reported the issue to ASIC itself and no customer lost money.
Morgan Stanley and Macquarie Securities were both issued infringements for failing to vet client orders that resulted in share price spikes, while ABN Amro and Deutsche Bank were fined for breaking futures trading rules.