ASIC has today accepted enforceable undertakings (EUs) from each of the National Australia Bank Limited (NAB) and the Commonwealth Bank of Australia (CBA) in relation to the banks’ wholesale spot foreign exchange (FX) businesses.
As a result of ASIC’s investigation, ASIC is concerned that between 1 January 2008 and 30 June 2013, both banks failed to ensure that their systems and controls were adequate to address risks relating to instances of inappropriate conduct identified by ASIC.
NAB
ASIC identified the following conduct by employees of NAB between 1 January 2008 and 30 June 2013:
- on several occasions, a NAB employee on an offshore spot FX desk, acting together with an employee of another Australian bank, shared confidential information and entered offers into the trading platform without any apparent legitimate commercial reason for placing the offers;
- on a number of occasions, NAB employees disclosed specific confidential details of pending client orders to external market participants, including identification of the client through the use of code names; and
- on several occasions, NAB employees on an offshore spot FX desk inappropriately exchanged confidential and potentially material information about the bank’s client flow or proprietary positions.
ASIC is concerned that NAB did not ensure that its systems, controls and supervision were adequate to prevent, detect and respond to such conduct, which had the potential to undermine confidence in the proper functioning of the market.
Under the EU, NAB will develop a program of changes to its existing systems, controls, monitoring and supervision of employees within its foreign exchange business to prevent, detect and respond to, amongst others, the following types of conduct:
- attempts to manipulate the market for a currency, including by placing offers without a legitimate commercial reason and attempts to influence benchmark rates;
- inappropriate trading while in possession of confidential and potentially material information; and
- disclosures of client confidential information.
The program and its implementation will be assessed by an independent consultant appointed by ASIC.
NAB will also make a community benefit payment of $2.5 million towards advancing financial literacy education related to the aged care sector and the promotion of ethical behaviour in Australian financial markets.
CBA
ASIC identified the following conduct by employees of CBA between 1 January 2008 and 30 June 2013:
- on two occasions, CBA employees on an offshore spot FX desk acquired proprietary positions in a currency after coming into possession of knowledge of large CBA fix orders in that currency;
- on at least two occasions, CBA employees traded in a manner that may have been intended to cause the trigger price for a stop loss order to trade when it might not have traded at that time; and
- on a number of occasions, CBA employees on an offshore spot FX desk disclosed confidential details of pending client orders to external third parties, including identification of the client through the use of code names.
Under the EU, CBA will develop a program of changes to its existing systems, controls, monitoring and supervision relating to the management of fix orders, management of stop loss orders, and external communications containing specific confidential information to address such conduct. The program will incorporate changes already made by CBA as part of an existing review of its Global FX business.
CBA will also make a community benefit payment of $2.5 million towards advancing financial literacy education related to the aged care sector.