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Finance Broking Australia-regulatory guide 238 suspicious activity reporting

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Regulatory Guide 238 - Suspicious activity reporting CPD

This guide is for participants of the ASX market (operated by ASX Limited) and the Chi-X market (operated by Chi-X Australia Pty Limited). It gives guidance on how market participants can comply with the ASIC market integrity rules relating to suspicious activity reporting.

ASIC is responsible for supervising Australian domestic licensed financial markets.

As part of ASIC’s supervisory responsibilities, ASIC makes market integrity rules and monitors compliance by market participants with those rules.

RG 238 gives guidance on the obligations for participants of the ASX market (operated by ASX Limited) and the Chi-X market (operated by Chi-X Australia Pty Limited) to notify ASIC of suspicious trading activity. Compliance for the market integrity rules for suspicious activity reporting is stated to be required from 1 November 2012; however, ASIC will waive the obligation to comply with the rule until 20 January 2013.

Under Rule 5.11.1, a market participant must notify ASIC if it has reasonable grounds to suspect that a person has placed an order or entered into a transaction while in possession of inside information, or which has the effect of creating or maintaining an artificial price or a false or misleading appearance in the market or price for trading in financial products.

For the purposes of Rule 5.11.1, ASIC do not expect a market participant to actively seek to detect reportable matters, or to undertake detailed legal analysis about whether a reportable matter constitutes a contravention of the law or market integrity rules. If a market participant becomes aware of information, in the course of its business activities and in the course of complying with its existing obligations, which may raise a warning signal of market misconduct, the market participant must notify ASIC.

‘Reasonable grounds to suspect’ requires both a suspicion and a just cause for that suspicion. The test is satisfied by circumstances that would create an actual apprehension or fear that a reportable matter exists.

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