The Australian Securities and Investments Commission (ASIC) is celebrating a win after the Federal Court found ANZ Group to have breached continuous disclosure obligations as it failed to disclose to the public that its underwriters purchased about one-third of its $2.5 billion (US$1.6 billion) institutional share placement in 2015.
ASIC filed a lawsuit against ANZ in September 2018 due to the breach, citing that the lender knew between $754 million and $791 million of placement shares were to be allocated to underwriters.
ASIC pointed to ANZ’s press release dated Aug. 7, 2015, which stated that it raised $2.5 billion in equity capital through the placement of about 80.8 million of its ordinary shares at $30.95 apiece, but did not state that $790 million of the shares had not been allocated to institutional investors and would be taken up by the underwriters.
In its defence, ANZ denied that a reasonable person would expect that the information if disclosed, would have a material effect on the price of its shares or may likely influence investors on their decision to acquire or dispose of ANZ shares. The argument did not convince Federal Court Justice Mark Moshinsky.
“I accept ASIC’s contention. In light of that, I conclude that the pleaded information would, or would be likely to, influence persons who commonly invest in securities in deciding whether to acquire or dispose of ANZ shares,” Mr. Moshinsky said in the judgment, published on Oct. 13.
“I conclude that ANZ breached its continuous disclosure obligation in s 674(2) of the Corporations Act.”
ASIC said that the court decision reaffirms the importance of continuous disclosure rules to maintain market integrity.
It added that the decision also confirms that underwriters acquiring a significant portion of shares in a capital raising may be considered price-sensitive information needing market disclosure.
“Today’s decision is significant. ASIC has stayed a long course to achieve this outcome. It reaffirms ASIC’s long-standing expectation that an issuer of securities must disclose material shortfalls in capital raisings to the market,” ASIC Deputy Chair Karen Chester said.
ANZ to Review Judgment
Meanwhile, ANZ acknowledged the court ruling and said it is reviewing the judgment.“ANZ today acknowledged the decision of the Federal Court of Australia in relation to ANZ’s fully underwritten institutional share placement in August 2015,” the bank said.
“The Court found that ANZ should have advised the market of the joint lead managers’ take-up of shares in its 2015 institutional share placement. The maximum penalty is $1 million.”
Last September, the Federal Court approved a settlement between ANZ and ASIC to resolve a legal action relating to fees and interest charged for credit card cash made in some circumstances.
The legal action referred to a situation where funds were deposited to a credit card account and showed up as available, and then a cash advance was transacted on that account before the funds were processed.
ANZ agreed to extend the remediation period to include November 2018 to September 2021, a $15 million civil penalty, and to pay ASIC’s costs.
