Macquarie’s Broking Arm Sued Over Misleading Short Sale Data

ASIC estimates the number of misreported short sales could range from 298 million to as many as 1.5 billion trades.

A man stands in the viewing gallery at the Australian Stock Exchange in Sydney, Australia, on March 9, 2020. Rick Rycroft/AP Photo

The Australian Securities and Investments Commission (ASIC) has launched civil proceedings against the broking arm of Macquarie Bank in the New South Wales (NSW) Supreme Court.

The corporate watchdog alleges Macquarie Securities misreported millions of short sale transactions over a 14-year period, misleading the market.

It is ASIC’s first court case focused on short sale reporting and marks the fourth enforcement action against Macquarie in just over a year.

Short selling involves selling borrowed shares with the intention of buying them back at a lower price. If the stock price rises instead of falling, the short seller can incur heavy losses.

Because the strategy can signal a lack of confidence in a stock, short positions are closely watched by investors.

The regulator claims Macquarie’s internal systems repeatedly failed to detect the inaccuracies between December 2009 and February 2024.

“This action is timely given significant recent global market volatility,” said ASIC Chair Joe Longo. “Accurate and reliable data underpins the integrity of, and confidence in, Australia’s financial markets.”

Longo said the alleged failures may have caused the financial services industry to rely on incorrect information for over a decade.

“[Macquarie Security’s] repeated systemic failure to detect and resolve these issues indicated serious neglect of its systems and disregard for operational controls and technological governance,” he added.

Millions of Sales Potentially Misreported

ASIC estimates the number of misreported short sales could range from 298 million to as many as 1.5 billion trades.

In its statement of claim, the regulator alleges Macquarie Securities underreported the daily volume of short-sold shares to the market operator by at least 73 million.

The reporting obligations stem from reforms introduced after the 2008 global financial crisis, during which short selling was blamed for intensifying market instability.

These rules are designed to help investors, regulators, and policymakers monitor market sentiment and detect potential risks.

ASIC has also flagged the role of activist short sellers—market participants who take short positions and then release information, often publicly, to drive down the stock price. This can be done through formal reports or via informal means, including social media.

Macquarie Responds, Admits Reporting Failures

Macquarie confirmed it is reviewing the claims made by ASIC and acknowledged that its broking arm had identified reporting problems in 2022.

The issues were self-reported to the regulator, followed by the discovery of related problems.

“These reporting issues have been remediated and additional controls implemented,” the company said in a statement.

“Macquarie takes its compliance obligations very seriously and continues to invest in programs to further improve systems and controls across the group.”

The bank said it would not comment further while the case is before the court.

The case highlights the rising scrutiny of Australia’s largest financial players by the corporate regulator, especially in matters involving technology systems, reporting standards, and market transparency.