Australia's Financial Regulator Targets ANZ Over Share Placement

Tom Burroughes

18 September 2018

Australia’s national financial regulator has told , or ASIC, has advised ANZ about the civil proceedings. These relate to a matter that is the subject of separate proceedings by the Australian Competition and Consumer Commission. ANZ notified the Australian Securities Exchange of ASIC’s investigation on 1 June 2018.

ANZ ASIC alleges that the bank should have advised the market that the joint lead managers took up approximately 25.5 million shares of the placement.

The bank said that it will defend itself from the allegations.

Banks and wealth managers in the country have been hit with regulatory and legal cases in recent months, in some cases around mis-selling of financial products, excessive charges, or charging for non-existent services, and anti-money laundering control breaches. The cases have tarnished what had been seen internationally as a relatively clean and straightforward financial system. Last year, the Australian government set up a Royal Commission to probe the sector, and it has brought to light a raft of problems. (See a roundup here.)

The shares in question represented less than 1 per cent of the shares on issue at the time and were taken up by the joint lead managers in circumstances where the book indicated that the placement was covered at 103 per cent, ANZ said in a statement last Friday.

ANZ is not aware of a precedent for a listed entity to disclose the take up of shares by underwriters in an equity placement.

“ANZ's disclosure in relation to the placement was in accordance with its ASX disclosure obligations as well as market practice and we are defending the matter,” ANZ chief risk officer Kevin Corbally said.

The bank added that it does not intend to comment further on the matter at this time.

A report in the Financial Times (of London) described the share placing as “controversial”. The case involves not just ANZ, but two other underwriters on the deal: Citigroup and Deutsche Bank, and some senior bank executives. A third underwriter, , has reportedly won immunity from prosecution after reporting the matter to regulators, the FT said.

ASIC claims that the failure to attract the level of interest expected from institutional investors on the day of the placement in August caused a “sequence of communications” among senior executives of ANZ and the underwriters. ANZ subsequently issued a statement to ASX, the stock exchange, which failed to disclose the acquisition of 25.5m shares by Citi, Deutsche and JPMorgan (source: FT, 14 September).

The regulator claims that disclosing this information would have materially affected ANZ’s shares and that laws require such a bank to notify AXS of the acquisition of shares by the underwriters.