Societe Generale Securities Australia (SGSA) has been ordered to pay a $30,000 penalty after pleading guilty to four separate counts of breaching client money obligations.
SGSA was sentenced in relation to two counts of breaching section 993B(1) of the Corporations 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 law.
The first count occurred between 8 December 2014 and 8 February 2017, when SGSA withdrew client money on around 4,636 occasions from the Australian client-segregated accounts and deposited the monies in client accounts held with Societe Generale SA Hong Kong branch.
The accounts held by the Hong Kong branch were not held with an Australian ADI nor an approved foreign bank.
The second count occurred between 30 December 2014 and 8 February 2017 when SGSA deposited client money into five overseas non-ADI bank accounts on around 7,363 occasions.
During the period of both counts, the average end-of-month total value of client money not held in an account that satisfied the requirements of the Corporations Act totalled around $771 million.
Mr Atkinson sentenced the financial institution to pay a total fine of $15,000 for counts one and two.
In addition, SGSA was sentenced to a further two counts of breaching s993C(1) of the Corporations Act, by making payments out of a client money account that was not permitted by regulations 7.8.02 of the Corporations Regulations.
Count three related to 20 occasions between 27 January 2017 and 9 January 2018, in which part of SGSA’s daily intercompany margin call/reconciliation process included withdrawing around $496.8 million in client money from client-segregated accounts.
Finally, count four occurred between 1 January 2015 and 22 September 2016, when a total of around $144,000 in bank fees and charges were improperly withdrawn from the client-segregated accounts.
The withdrawals made in counts three and four were not allowed under the regulations.
Mr Atkinson sentenced SGSA to pay a total fine of $15,000 for counts three and four.
In delivering his sentence, Mr 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.”
The Australian Securities and Investments Commission (ASIC) commissioner Cathie Armour welcomed the decision, stating: “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.
“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.
In June, ASIC imposed additional conditions on the Australian Financial Services Licence (AFSL) of SGSA Australia (a division of France-based bank Societe Generale) in addition to being convicted of criminal charges as a result of ASIC’s investigation.
The additional licensing conditions also required Societe Generale to provide ASIC with attestations from a qualified senior executive and a board member, which confirm all remedial actions recommended by the independent expert have been adopted and implemented.
Societe Generale received a foreign ADI licence from the Australian Prudential Regulation Authority (APRA) in May 2019, which enables it to conduct banking business in Australia, with the exception of receiving retail deposits, as per the conditions of a foreign ADI licence.
The French financial institution opened its first Australian office in 1981 in Sydney, where it has provided products and services in the areas of financial advisory and global markets.
Malavika Santhebennur is the features editor on the mortgages titles at Momentum Media.
Before joining the team in 2019, Malavika held roles with Money Management and Benchmark Media. She has been writing about financial services for the past six years.