Comment: Scatty Macquarie an Australian banking industry shocker

Ian Rogers
The consequences of tolerating long running, daily defects in its US blue sheets (as reported above) might be considered minor for Macquarie. The fine imposed last month by FINRA was equivalent to a couple of days profit for Macquarie Securities, though more of a blow to its US subsidiary responsible for the mess, Macquarie Capital (USA) Inc.

This US offshoot of Macquarie Group has a record of blowing the firm's money away on conduct irregularities.

In March 2015, the Securities and Exchange Commission sanctioned Macquarie Capital in connection with "offering fraud" relating to an IPO for Puda Coal. The SEC charged the Puda Coal executives behind the offering fraud at the company, which is no longer in business.

Macquarie Capital (USA) Inc agreed to settle the SEC's charges by paying US$15 million and separately covering the costs of setting up a Fair Fund to compensate investors who suffered losses after purchasing shares in the public offering by Puda Coal. 

Lifting from the SEC release:

"Macquarie Capital was the lead underwriter on a secondary public stock offering in 2010 by Puda Coal, which traded on the New York Stock Exchange at the time and purported to own a coal company in the People's Republic of China.

"In the offering documents, Puda Coal falsely told investors that it held a 90 per cent ownership stake in the Chinese coal company.

"Macquarie Capital repeated those statements in its marketing materials for the offering despite obtaining a report from Kroll Associates showing that Puda Coal did not own any part of the coal company."

In April 2015, the US District Court for the Southern District of New York entered a final judgment enforcing these penalties, agreed to between Macquarie and the SEC.

Search ASIC for the phrase "proceedings against Macquarie" and the alleged or actual offenders' name pops up 14 times. Commonwealth Bank does worst with 20 ASIC cites. All others fare better, with near competitors seemingly holding an unblemished record in this archive.

Match the words "sentenced" and "Macquarie" at ASIC and this problem product of Australia's banking industry features 25 times, more than one in seven times out of all the pairings of sentenced and bank in this ASIC database.

This seems disproportionate. Macquarie accounts for around five per cent of the banking assets of all Australian banks and three per cent of industry profit.

Lately, after a long period of poor results, Macquarie's profit (measured as ROE), has approached industry benchmarks, with a return in the half year to September 2015 of 15.8 per cent.