What Are The Penalties For Not Reporting Trades to ASIC?

On 12 October 2015, reporting requirements commenced for OTC derivative trades in Phase 3B and there are strict penalties for those who fail to report. Learn here what penalties can arise, if one fails to do so.

Australian issuers of OTC derivatives (with less than A$5 billion gross notional outstanding positions as of 30th June 2014) are required to report under the ASIC Derivative Transaction Rules (Reporting) 2013 as amended (the Reporting Rules).  The $127,250 penalty issued to Westpac Banking Corporation by ASIC in June 2017 highlights the need to ensure compliance with reporting requirements.

Under section 901E of the Corporations Act 2001 (Cth) (Corporations Act), a person must comply with provisions of the Reporting Rules. That section is a civil penalty provision, and courts must, if satisfied that a person has contravened that section, make a declaration of contravention on application by the Australian Securities and Investments Commission (ASIC) (section 1317E of the Corporations Act).

Courts may order payment of pecuniary penalties for contravention of a rule up to (and including) the maximum penalty amount specified for the rule (sections 1317G (1DA) and (1DB) of the Corporations Act).

Section 901A(4) of the Corporations Act 2001 (Cth) allow the Reporting Rules to specify a penalty amount for a rule not exceeding 1,000 penalty units.

The maximum penalty specified – for each of Reporting Rules 2.2.1 (Transaction Reporting Requirements and Position Reporting Requirements), 2.2.2 (Reporting Requirement – Changes), 2.2.3 (Reporting Requirement – Timing (generally, T+1), 2.2.4 (Reporting Requirement – Format), 2.2.5 (Reporting Requirement – Continuity of reporting), 2.2.6 (Reporting Requirement – Accuracy of reporting), 2.3.1 (Keeping of records), 2.3.2 (Provision of records or other information), 2.4.4 (Modification, termination or assignment of outstanding positions before the Position Reporting Date) and 2.4.5 (Reporting to Licensed Repositories from 1 October 2014) – is 1,000 penalty units.

Each penalty unit is currently $210 – so the maximum penalty for each of those Reporting Rules is $210,000.

ASIC also has a number of what it calls its “administrative powers”. Potential remedies that may be available to ASIC under those powers include suspending or cancelling an Australian financial services licence.

For example, ASIC (under section 915C of the Corporations Act) may suspend or cancel an Australian financial services licence, after giving the licensee an opportunity to appear or be represented at a private hearing before ASIC and to make submissions, where the licensee has not complied with their obligations under section 912A (including the obligation under section 901Eof the Corporations Act to comply with the provisions of the Reporting Rules).

Read the rest of this article on Finance Magnates.