Macquarie Group Ltd (ASX: MQG) shares have been a standout performer this year as the bank churns out growth in all of its business units.
The stock is up 25% since January, but it's a different story today. Macquarie shares are around 1.5% in the red, fetching $229.74 apiece at the time of writing.
The Australian Securities and Investments Commission (ASIC) has fined Macquarie over energy market trades made in 2022.
Let's take a look.
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Why was Macquarie fined?
Macquarie shares are in the spotlight today after ASIC fined the bank $4.99 million for failing to stop clients from manipulating energy markets through several on-market trades.
According to ASIC, these transactions took place from January to September 2022, a period when global energy prices surged due to Russia's invasion of Ukraine.
The regulator said that during that time, the bank "breached market integrity rules by permitting three of its clients to place suspicious orders" on 50 occasions.
Each order displayed characteristics of an intention to 'mark the close', meaning each order was placed within the last minute of market close, impacting the daily settlement price, in a direction favourable to the client's existing interest in that contract.
The issue was linked to a technical failure in Macquarie's surveillance system, which monitors suspicious activity among various financial and commodity markets.
The system apparently shut down at 4.30pm instead of 4pm, enabling clients to place trades after market monitoring had ended. The ASX closes trading at 4pm.
The 'mark the close' tactic was used to manipulate the settlement price in favour of the client. ASIC says the bank should have suspected something was fishy but didn't.
And despite six direct warnings from ASIC, Macquarie allowed over 40 such trades to go through.
ASIC Chair Joe Longo stressed that this kind of manipulation could impact energy prices downstream.
He said Macquarie played a large role in Australia's energy derivatives market and that the bank "must ensure suspicious orders are not permitted to be placed on our markets".
The record penalty imposed by the MDP reflects the serious, prolonged and potential systemic failures by Macquarie to detect and prevent suspected manipulation in the ASX 24 market for energy derivatives.
We put Macquarie on notice about suspicious orders placed by its clients on numerous occasions and it repeatedly failed to take timely action to address the conduct of its clients and the gap in its surveillance capability. As a consequence, it permitted further suspicious orders to be placed on the market.
What's next for Macquarie shares?
Macquarie shares have performed well this year, and this $5 million penalty is unlikely to have a major impact on the company's fundamentals. Financially, Macquarie remains strong.
Its recent $24 billion sale of data centre giant AirTrunk is expected to deliver more than $1 billion in performance fees, according to JP Morgan analysts.
While the fine is a setback, analysts remain optimistic about Macquarie shares. The stock is rated a moderate buy from consensus, according to CommSec.
