Supervision and enforcement approach of ASX Markets Supervision

Enforcement activity that is timely and transparent is likely to have the greatest corrective impact on unacceptable market behaviour. Visible enforcement also supports investor confidence in ASX Markets Supervision’s ability to monitor and enforce its Rules, thus serving an important public protective purpose.

ASX Markets Supervision’s investigation and enforcement process is confidential during the investigation and Disciplinary Tribunal hearing stages. The Disciplinary Tribunal publishes the determination of its findings by way of disciplinary circulars which are also posted on the ASX Markets Supervision's website.

ASX Markets Supervision has a variety of enforcement methods at its disposal to ensure the preservation of the market’s integrity.  ASX Markets Supervision will apply an enforcement response commensurate with the circumstances and seriousness of each inappropriate activity.

The broad range of supervisory enforcement measures open to ASX Markets Supervision are:

ASX will also exercise discretion in determining disciplinary action.

Education and guidance

ASX Markets Supervision commits extensive resources to the education, guidance and training of its Participants and listed entities to ensure that they operate within the spirit and intention of the supervisory framework and the law. In particular, the following activities are undertaken:

  • Seminars and workshops to educate in relation to new Rules or areas of law which have significant market impact;
  • Demonstrations of ASX Markets Supervision monitoring and supervisory capability to discourage inappropriate behaviour;
  • Guidance material to assist in understanding the intention of the regulatory framework;
  • Discussion to assist in understanding or interpreting the regulatory framework; and
  • Establishment of base levels of competence.

Persuasion

Where it appears that a Participant or entity has breached or may potentially breach a Rule, ASX Markets Supervision may pursue corrective action through discussion and persuasion. Such action may be to ensure that disclosure is provided in a timely way or that a potentially manipulative market activity ceases. The persuasive approach may also be coupled with retrospective review and the sanctioning of the behaviour.  If, following an investigation, ASX Markets Supervision considers it has sufficient evidence to demonstrate that a Participant has contravened ASX Rules it may commence disciplinary proceedings.

Escalation within an organisation

Where disciplinary proceedings are not considered appropriate in the circumstances, ASX Markets Supervision may seek to achieve a regulatory outcome through ASX Markets Supervision's supervisory management issuing a letter to a Regulated Person's senior management.  The letters, commonly referred to as Management Letters:

  • Set out the circumstances of a matter reviewed by ASX Markets Supervision;
  • Raise issue with respect to apparent breaches of the Exchange's Operating Rules; and
  • Address conduct which is, in ASX Markets Supervision's view, inconsistent with ASX Group's obligations as a market licensee and licenced clearing and settlement facilities. 

These letters can also require a Regulated Person take remedial or other action to facilitate on-going compliance with their obligations under the Operating Rules.

Warning

Where a potential Rule breach or inappropriate behaviour arises, ASX Markets Supervision may decide that a warning is an adequate enforcement response in order to encourage corrective action and to deter future misconduct. In some cases, such warnings may be made public in order to act as a further sanction and/or to more broadly influence the market in relation to appropriate conduct.

Publicly identifying a potential breach

It may be effective to use market pressure to ensure regulatory compliance by publicly identifying potential breaches. For example, if ASX Markets Supervision believes that there has been a failure to comply with a company’s disclosure obligations under the Listing Rules and this has not been adequately explained, it may publicly query the company and release the company’s response.

Agreed remedial action

Where it appears that a Participant or entity may have breached or may potentially breach a Rule, ASX Markets Supervision may pursue corrective action to promote an improvement in compliance standards and processes through mutually agreed, formal and documented strategies.

Suspending or removing capacity to operate on market

ASX has powers to suspend or remove a Participant’s or entity’s market status in response to a serious breach of the Rules or in order to manage an informed and orderly market. These powers will only be used in exceptional cases as they impinge significantly upon the ability of a Participant to do business and the ability of investors to trade in the securities of a particular entity.

ASX Disciplinary Tribunal

The Disciplinary Tribunal (and the Appeal Tribunal), through a process of peer review, hears and determines alleged contraventions of ASX's Operating Rules and allegations of unprofessional conduct by brokers or broking firms.  Where an alleged contravention of ASX's Rules is proven, the Tribunal can impose a wide range of penalties.  ASX Market Rules 28.3.2 and 28.3.7 (PDF 221KB) set out the powers that can be exercised by the Tribunal under the Market Rules.

More information on the Tribunal's functions, operations and findings.

Referrals and notifications to ASIC

ASX has statutory obligations to refer to ASIC suspected significant breaches of its Operating Rules and to notify ASIC of prescribed breaches of the Corporations Act.  ASIC, rather than ASX, has the power to prosecute breaches of the Corporations Act.

Exercise of discretion

The application of enforcement activity in the face of potentially aberrant behaviour requires the exercise of discretion. ASX Markets Supervision recognises that it is important to treat Participants fairly and equally, and that it must be consistent in its approach.

In determining our response to breaches we will give appropriate recognition to the following matters:

  • Culture – the culture and compliance framework the listed entity or Participant has in place, and the instance (or frequency) of previous breaches.
  • Identification – the timeliness with which the breach was identified and acknowledged.
  • Assessment – the timeliness and objectivity of the listed entity or Participant in assessing the materiality and consequence of the breach.
  • Reporting - the timeliness in self-reporting the breach to ASX Markets Supervision.
  • Responsiveness - the timeliness and extent of actions taken to address the breach.
  • Compensation – (in the case of Participants) the timeliness and extent of compensation to impacted stakeholders.
  • Prevention – the timeliness and extent of action taken to change processes to ensure recurrence is prevented.