The Federal Court on Friday ordered Australia and New Zealand Banking Group Limited (ANZ) to pay a penalty of $900,000 for breaching its continuous disclosure obligation during a $2.5 billion institutional share placement in 2015.
The court declared that ANZ contravened section 674(2) of the Corporations Act by failing to notify the ASX that ANZ shares, with a value of between approximately $754 million and $790 million of the $2.5 billion of ANZ shares offered in an institutional placement, were to be acquired by its underwriters.
Calling it a “landmark case” for the Australian Securities and Investments Commission (ASIC), the regulator’s deputy chair Karen Chester said the decision “confirms the paramount importance of continuous disclosure”.
“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.
“If such a contravention occurred today, the maximum penalty could be anywhere between $15 million to $780 million.”
Ms Chester added that ASIC will continue to enforce the continuous disclosure regime to ensure investors are provided material information to make informed investment decisions.
“Continuous disclosure is key to maintaining market integrity,” concluded Ms Chester.
When delivering his reasons, Justice Moshinsky stated that the contravention is very serious, and a large penalty is required to achieve deterrence.
ANZ was also ordered to pay ASIC’s costs of and incidental to the proceedings.
History of the case
On 6 August 2015, ANZ issued a release to the ASX that its share purchase plan would raise a total of $3 billion and shares were placed in a trading halt until the next day.
On 7 August, ANZ issued another release announcing it raised $2.5 billion in new equity capital “through the placement of approximately 80.8 million ANZ ordinary shares at the price of $30.95 per share”.
ASIC’s case alleged ANZ contravened the Corporations Act by failing to notify the ASX that about $791 million of the $2.5 billion in ANZ shares offered in the placement were instead to be acquired by its underwriters rather than with the investors.
Further to this, ASIC contended that if the information had been disclosed, “persons who commonly invest in securities would have held an expectation that the underwriters would promptly dispose of allocated or acquired placement shares, and in doing so, place downward pressure on ANZ’s share price”.
