ASIC asks for Westpac BBSW rate-rig emails

ASIC has attempted to force Westpac to hand over any private messages between the bank’s executives and its star traders.

The corporate watchdog has attempted to force Westpac to hand over any private messages sent between the bank’s most senior executives and its star traders, including Col Roden and Sophie Johnston, in the ­period after the Federal Court found the lender engaged in unconscionable conduct by trying to rig the benchmark BBSW rate.

An application to the court made by the Australian Securities & Investments Commission has asked judge Jonathan Beach to reveal further information out of the nation’s second-largest bank before the court rules on any penalties to slap Westpac with.

Westpac declined to comment as the matter was before the courts.

The so-called fishing expedition by the corporate watchdog includes requests for documents outlining any disciplinary action or remuneration changes inflicted on nine separate Westpac employees in the wake of the Federal Court’s finding that on four separate occasions the bank “engaged in manipulative trading”.

The traders targeted by ASIC include Mr Roden and Ms Johnston, Daniel Park, Bryan Duignan and William Hosie, along with Westpac treasurer Curt Zuber, deputy treasurer Joanne Dawson, treasury risk manager Satruhan Sharma, and former treasury director Mostyn Kau.

ASIC has also asked for “any internal and external communications” from Westpac’s key management personnel “to or from” any of the named traders or employees or which discuss the courts’ findings. The key personnel list includes Westpac chief executive Brian Hartzer, divisional heads Lyn Cobley, Brad Cooper, George Frazis and the bank’s board directors.

In late May, Justice Beach found Westpac engaged in unconscionable conduct by trying to rig the benchmark bank bill swap rate on four occasions out of 16 alleged by the corporate watchdog.

While the court later this year is to decide on a penalty, Westpac and ASIC are able to submit information to assist Justice Beach’s decisions. The next hearing is scheduled for mid-October.

ASIC has also asked for any documents or material on Westpac’s training procedures or compliance systems to see if there was any change since 2016, when it started chasing banks over the BBSW rigging.

In a series of sensational lawsuits, ASIC achieved penalties collectively totalling $120 million out of Commonwealth Bank, National Australia Bank and ANZ over claims star traders in the banks’ market divisions were continually rigging the rate. Westpac was the only major bank not to settle the claims.

Westpac’s star trader, Mr Roden, whose expletive-ridden transcripts garnered attention during the trial, reportedly left Westpac following the court case. It is likely that Mr Roden was well remunerated by Westpac, as the trader generated $850m in revenue for Westpac over two years.

While the Federal Court threw out more serious allegations of market manipulation brought against Westpac by ASIC, Justice Beach found “by reason of inadequate procedures and training” the bank breached its financial service licence conditions.

ASIC launched civil penalty proceedings against Westpac in April last year, accusing it of trading in a manner designed to create an artificial price for BBSW 16 times between April 6, 2010 and June 6, 2012. At the time, the BBSW was set during a five-minute trading frenzy between 9.55am and 10.05am. The system has since been changed and is now run by the ASX.

ASIC claimed that Westpac, on the days it tried to rig the market, had a large number of products price-based on BBSW, and it tried to move the benchmark higher or lower to maximise its profit or minimise its loss, to the detriment of those holding positions opposite to Westpac’s.