Societe Generale Securities Australia Pty Ltd (SGSAPL) has been sentenced in Sydney’s Downing Centre Local Court on charges brought by ASIC relating to breaches of client money obligations.
SGSAPL must pay a total penalty of $30,000 after pleading guilty to four separate counts of breaching client money obligations.
In delivering sentence, Magistrate Atkinson said, ‘In my view, despite all of the work that the company has done, there is still a need for general deterrence. Australia, in recent years, has had a banking Royal Commission and there has been action taken post that Royal Commission, and what is apparent is that a very strong message has to be sent about the need for companies to comply with legislation and regulation.’
SGSAPL was sentenced in relation to two counts of breaching s993B(1) of the Corporations Act (the Act) by receiving client money in connection with financial services but failing to deposit that money into an Australian Authorised Deposit-taking Institution (ADI) or an approved foreign bank, as required under the law.
The first count took place between 8 December 2014 and 8 February 2017, when SGSAPL withdrew client money on approximately 4,636 occasions from the Australian client-segregated accounts and deposited the monies in client accounts held with Societe Generale S.A., Hong Kong branch. The accounts held by Societe Generale S.A. Hong Kong were not held with an Australian ADI nor an approved foreign bank.
The second count took place between 30 December 2014 and 8 February 2017 when SGSAPL deposited client money into five overseas non-ADI bank accounts on approximately 7,363 occasions.
During the period of both counts one and two, the average end-of-month total value of client-money not held in an account satisfying the requirements of the Act totalled approximately AUD $771 million.
Magistrate Atkinson sentenced SGSAPL to pay a total fine of $15,000 for counts one and two.
SGSAPL was sentenced for a further two counts of breaching s993C(1) of the Act, through making payments out of a client money account that were not permitted by regulations 7.8.02 of the Corporations Regulations (the Regulations).
Count three related to 20 occasions between 27 January 2017 and 9 January 2018, in which part of SGSAPL’s daily intercompany margin call/reconciliation process included withdrawing approximately $496,777,226 in client money from client segregated accounts.
Count four took place Between 1 January 2015 and 22 September 2016, when a total of approximately AUD $144,000 in bank fees and charges was improperly withdrawn from the client-segregated accounts.
The relevant withdrawals made in count three and four were not permitted withdrawals under the Regulations. Magistrate Atkinson sentenced SGSAPL to pay a total fine of $15,000 for counts three and four.
ASIC Commissioner Cathie Armour welcomed the decision.
‘The protection of client funds is critical to investor confidence and market integrity. The law is very clear about the uses of client money to provide certainty and transparency for clients and licensees. Breaches of these requirements are a serious compliance failure,’ Ms Armour said.
‘This is the second criminal prosecution brought by ASIC in recent months where a licensee failed to deal with client funds in a manner required by law. ASIC will continue to devote resources to ensure that client monies are dealt with appropriately’.
The Commonwealth Director of Public Prosecutions prosecuted the matter.
Background
In addition to being convicted of criminal charges as a result of ASIC’s investigation, SGSAPL has accepted additional licence conditions imposed by ASIC on its AFS licence (see 20-136MR).