Maximum penalty has increased since the bank breached disclosure rules in 2015
In a recent ruling, the Federal Court ordered ANZ to pay a fine of $900,000 for its failure to disclose vital information regarding a share placement in August 2015.
Federal Court Judge Mark Moshinsky found ANZ guilty of breaching its continuous disclosure obligations by not revealing a $790 million shortfall in its share placement, according to a report by The Australian.
“This is a landmark case for ASIC,” Karen Chester, Australian Securities and Investments Commission deputy chair, told The Australian. “Today’s decision confirms the paramount importance of continuous disclosure, [which] is key to maintaining market integrity.”
ANZ had argued that the information about the shortfall, which would be absorbed by its underwriters Citi, Deutsche Bank, and JPMorgan, was not material. However, Moshinsky rejected this claim.
“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,” Chester told The Australian.
ASIC stated that Justice Moshinsky ordered ANZ to pay the $900,000 penalty along with ASIC's costs, emphasising the seriousness of the contravention and the need for a large penalty to deter such conduct.
While this ruling is a victory for ASIC, it falls short of the expectations set by Australian regulators when two separate lawsuits were filed in 2018. It also follows the collapse of the competition regulator's criminal cartel lawsuit over the share placement last year.
Chester told The Australian that if a similar contravention occurred today, the maximum penalty could range from $15 million to $780 million. She urged listed entities to view this penalty decision as a clear warning to fulfil their continuous disclosure obligations.
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ANZ, in response to the ruling, stated that it is currently reviewing the decision along with the judgement delivered in October.
The share placement in question was initiated by ANZ in response to new banking regulations requiring major Australian lenders to rapidly increase their capital buffers, The Australian reported. On Aug. 7, 2015, ANZ published a market release claiming the success of its $2.5 billion market raising, when in reality, it faced a shortfall that resulted in underwriters Deutsche Bank, Citi, and JP Morgan acquiring the shares.
In the previous judgement delivered in October, Moshinsky deemed the shortfall to be material information, contradicting ANZ's assertion that it was "generally available" information. At the time of the breach, the maximum penalty for such a violation was $1 million. However, in 2019, the penalty increased to a maximum of $782 million.
Last month, ASIC secured a $5 million penalty against superannuation trustee OnePath Custodians for engaging in false or misleading practices.
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