Bank's failure to disclose pertinent information breached market integrity, ASIC says
In a significant ruling on Friday, the Federal Court has found that ANZ violated continuous disclosure laws during a $2.5 billion institutional share placement in 2015. ANZ failed to disclose crucial information regarding material placement subscriptions allocated to underwriters, thereby breaching market integrity.
The landmark case serves as a reminder of the importance of adhering to continuous disclosure rules to ensure transparency and fairness in the market, according to the Australian Securities and Investment Commission. The court's decision also establishes that a substantial take-up of shares by underwriters in a capital raising exercise may be deemed as price-sensitive information, warranting disclosure to the market.
“ANZ failed to tell the market that the underwriters of this share placement had bought nearly a third of the shares, some $790 million,” said Karen Chester, ASIC deputy chair. “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.”
Chester further emphasised the importance of proper disclosure, highlighting its role in maintaining fair and efficient markets and facilitating accurate price formation. Investors have the right to be fully informed about information that could significantly impact the price or value of a security. In the context of capital raising transactions, ASIC expects issuers to assess the information at their disposal and make appropriate disclosures to the market, especially in cases where the capital raising falls short of expectations.
The court determined that ANZ had contravened continuous disclosure laws by failing to notify the Australian Securities Exchange (ASX) that a portion of the offered ANZ shares, ranging from approximately $754 million to $791 million, was to be acquired by underwriters instead of being placed with investors.
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In the judgement, Justice Moshinsky concluded that the undisclosed information was material. He acknowledged ASIC's argument that if the information had been disclosed, investors would have anticipated that the underwriters would promptly sell the allocated or acquired placement shares, thus exerting downward pressure on ANZ's share price.
ASIC will now present arguments for appropriate penalties, with the court's decision on penalties to be determined at a later date.
Last month, ASIC announced that it had banned a former CEO from working in the financial services sector for misusing his position. It also recently announced a ban on a Queensland-based company director.
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