Australia’s Australia and New Zealand Banking Group (ANZ) faced a significant setback on Friday as it lost a high-profile lawsuit, which found the institution guilty of non-disclosure concerning the acquisition of nearly one-third of a share issue valued at A$2.5 billion ($1.58 billion) in 2015.
In a landmark decision, the Federal Court of Australia ruled that ANZ, the nation’s third-largest lender, had contravened disclosure laws by not informing the public that its underwriters had purchased shares worth between A$754 million and A$791 million, instead of distributing them among investors.
This legal battle was initiated in September 2018 when the Australian Securities and Investments Commission (ASIC) filed a lawsuit against ANZ. In a related development, in June 2018, the competition regulator had also pressed criminal cartel charges against the bank and its two investment banking partners, Citigroup Inc (NYSE:C) and Deutsche Bank AG (NYSE:DB).
However, the Australian Competition and Consumer Commission surprisingly withdrew its lawsuit in February 2022, citing that there were “no longer reasonable prospects of conviction.” This marked an unexpected turn of events in what could have been one of the most significant white-collar criminal trials in the country.
Commenting on the court’s ruling, ASIC stated, “The landmark case reaffirms the importance of the continuous disclosure rules to maintain market integrity.” The commission further emphasized that a substantial acquisition of shares by underwriters during a capital raising exercise may constitute price-sensitive information necessitating market disclosure.
Under the court’s decision, the maximum penalty ANZ could face is A$1 million. However, ASIC noted that the maximum fine had been raised in 2019 to the greater of 50,000 penalty units, equivalent to A$15.65 million, or three times the financial benefit derived, or 10% of the annual turnover.
ANZ has expressed its intention to review the court’s judgment, while the securities regulator stated that it would present submissions on appropriate penalties.
($1 = 1.5838 Australian dollars)
