ANZ’s $40m ASIC fine for bond trading scandal ‘a bit on the light side’, judge says
ANZ chief Nuno Matos thought he’d drawn a line under past scandals with a record $240m agreed fine with ASIC. But a Federal Court judge may have other plans.
A judge scrutinising ANZ’s $240m fine from the corporate regulator for various scandals has described one of the penalties as “a bit on the light side”, as he criticised the bank’s decision to outsource reporting data to India.
Jonathan Beach, who is holding a two-day hearing into the record fine handed to ANZ by the Australian Securities and Investments Commission in mid-September, called into question the $40m penalty ANZ received for secondary market bond turnover reporting contraventions.
“I looked at the material in the statement of agreed facts … But I thought that that penalty was on the light side, given that it was conduct that seems to have occurred over a two-year time frame,” Justice Beach said.
As part of the $240m fine, ANZ had agreed to a $40m penalty for submitting inaccurate monthly secondary bond turnover data to the Australian Office of Financial Management over two years, making false and misleading statements and failing to lodge a report with ASIC.
But Justice Beach described the volume of misrepresentation as “very significant” and “very strange”.
“These are not small errors,” he said, later describing them as “extraordinary” and “fundamental and systemic”.
“Is it too hard to state on the facts, (ANZ was) recklessly indifferent to maintaining accurate records?”, Justice Beach asked.
University of Wollongong law professor and regulatory compliance expert Andy Schmulow described the $240m fine as “mates’ rates”, and said Justice Beach’s intervention was seismic.
“His comments are polite and restrained judicial speak for: ‘are you f..king nuts?’”, Professor Schmulow said.
ASIC’s counsel, Peter Collinson SC, told the court a lot of the errors occurred because the data gathering for AOFM was outsourced to a team in Bangalore. “Presumably the trading activities within ANZ and the traders are based in Australia [so] why is this all being sent to India to parcel all together?”
He added: “This data reporting is very important, and you wouldn’t want to encourage similar outsourcing to India or anywhere else.”
ANZ counsel Justin Williams SC said ASIC had agreed that the misreporting was not deliberate.
“There wasn’t an absence of attempt or desire to comply and what occurred is unfortunate,” Mr Williams told the court.
Justice Beach also dismissed ANZ’s recently published “root cause analysis” into its non-financial risk matters as “stating the obvious after the event”.
Justice Beach opened the hearing by drilling down into the details of ANZ’s behaviour, asking about hedging activity and pricing calls on the bond trading floor.
“I’m just trying to work out what is so unusual about ANZ’s behaviour here that took it outside the normal behaviour that one might expect from a duration manager,” Justice Beach told the court.
Mr Collinson walked Justice Beach through the agreed statement of facts, pointing to various regulatory guidelines that ANZ is alleged to have breached.
This included an incident when the commonwealth was denied $13m due to a reduction in the reference price.
“[There] was a failure to disclose that ANZ traded significant volumes of the 10-year Australian bond futures in that compressed interval of time before the pricing call,” Mr Collinson told the court.
The hearing continues on Wednesday.
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Originally published as ANZ’s $40m ASIC fine for bond trading scandal ‘a bit on the light side’, judge says
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