On 30 June 2020, Societe Generale Securities Australia Pty Ltd (SGSAPL) pleaded guilty at the Downing Centre Local Court in Sydney to client money offences.
SGSAPL is the second company in 2020 in Australia to face criminal prosecution for breaching client money provisions, which are designed to protect the interests of Australian financial services licensee clients by ensuring that client money is kept in authorised accounts.
SGSAPL pleaded guilty to four separate counts, which occurred during specific time intervals between 8 December 2014 and 8 February 2017 (see ), specifically:
- Two counts of breaching s993B(1) by receiving money in connection with financial services, and then failing to pay that money into an account that satisfied the client money requirements within s981B of the Corporations Act 2001.
- Two counts of breaching s993C(1) through making payments out of a client money account that were not permitted by reg 7.8.02 of the Corporations Regulations.
Each offence carries a maximum penalty of 250 penalty units (approximately $45,000).
Client money is money paid to a financial services licensee in connection with a financial service that has been provided, or will or may be provided, or in connection with a financial product. Client money must be paid into a client money account that meets the requirements of the Corporations Regulations and AFS licence holders can only make payments out of a client money account as specified by the Corporations Regulations.
These types of offences are regarded as serious misconduct and have been legislated in order to protect investors and enhance the confidence and integrity in Australia’s financial markets.
The matter has been listed for sentence on 21 September 2020.
In addition to SGSAPL guilty plea, as a result of ASIC’s investigation, SGSAPL has accepted additional licence conditions imposed by ASIC on the SGSAPL AFS licence (see ).
In addition to keeping separate client money from money belonging to licensees, the client money provisions also protect the interests of clients of AFSL licensees by:
- limiting the uses of client money;
- limiting the circumstances in which client money may be withdrawn from client money accounts; and
- imposing sanctions on licensees who fail to comply with the client money provisions.