Federal Court fines ANZ just $900k but ASIC says it’s pleased with the outcome

The Federal Court has fined banking giant ANZ just $900,000 over a case brought by ASIC that it failed to disclose to the market a share placement had fallen $790m short.

Federal Court judge Justice Mark Moshinsky.

The federal court has ordered ANZ to pay a penalty of $900,000 for failing to disclose information about an overhang of shares on a $2.5bn share placement in August 2015.

The modest fine follows an October ruling where Federal Court Judge Mark Moshinsky found ANZ breached its continuous disclosure obligations by not revealing a $790m shortfall in its share placement either on the night of August 6 or before the recommencement of trading in shares on August 7.

“This is a landmark case for ASIC,” said Australian Securities and Investments Commission deputy chair Karen Chester.

“Today’s decision confirms the paramount importance of continuous disclosure, (which) is key to maintaining market integrity.”

The Melbourne-based bank had claimed the information about the shortfall, which would be absorbed by its underwriters Citi, Deutsche Bank, and JPMorgan, was not material. This, however, was rejected by Justice Moshinsky.

“The penalty and remarks from the judge today are a clear and resolute message to ANZ and the market that this conduct was very serious. It also confirms that a significant take-up of shares by underwriters (in a share placement) must be disclosed to the market and investors,” Ms Chester said.

The regulator said that in ordering ANZ to pay the $900,000 penalty as well as ASIC’s costs, Justice Moshinsky had said the contravention was “very serious and a large penalty is required to achieve deterrence”.

ASIC deputy chair Karen Chester. Picture: Aaron Francis

Justice Moshinsky’s oral reasons for the penalty had not been published at the time of writing.

While the fine is a win for the corporate watchdog in a key long-running case, the penalty is far from what Australian regulators had hoped for when two separate lawsuits were filed in 2018, and comes after the competition regulator’s criminal cartel lawsuit over the placement fell apart last year.

“If such a contravention occurred today, the maximum penalty could be anywhere between $15m to $780m,” Ms Chester said.

“Listed entities should see today’s penalty decision as a strong and purposeful warning to fully meet their continuous disclosure obligations.”

In a statement, ANZ said it was “considering the decision together with the judgment delivered in October”.

ANZ launched the $2.5bn market raising in the wake of new banking regulations that required all of Australia’s major lenders to rapidly boost their capital buffers.

On August 7, 2015, ANZ published a market release at 7.30am announcing its $2.5bn market raising had been a success, when it actually faced a shortfall which resulted in the shares being acquired by underwriters Deutsche Bank, Citi, and JP Morgan.

In the original judgment in October, Justice Moshinsky said the shortfall was material information, and that ANZ’s position that the shortfall was “generally available” information was wrong.

Laws existing at the time imposed a maximum penalty of $1m for a breach of continuous disclosure laws. This was increased in 2019 to be up to $782m.