The Full Court of the Federal Court on Wednesday (2 October) upheld a finding that the Australia and New Zealand Banking Group (ANZ) breached its continuous disclosure obligations by failing to disclose a $790 million surplus in August 2015 .
During a 24-hour trading halt, ANZ undertook a fully subscribed institutional share placement to raise $2.5 billion from underwriters Citigroup Global Markets, Deutsche Bank AG and JP Morgan.
ANZ did not disclose that the underwriters would take 31 per cent of the placement, worth between $754 million and $790 million, either in its announcement of the completion of the placement or before.
Last year, Judge Mark Moshinsky fined the banking giant $900,000 and opened the door to a possible class-action lawsuit.
The judgment was based on Companies Act 2001 and the ASX Listing Rules, which provide that listed entities must immediately disclose information that is not generally available and that a reasonable person would expect to have a material effect on the price or value of securities.
In its appeal filed last December, ANZ alleged that Justice Moshinsky erred when he concluded that the information pleaded regarding the placement of the underwriters fell within the scope of the Companies Actand claimed it was “irrelevant to the value of ANZ shares”.
ANZ added that Justice Moshinsky erred in finding that a person who habitually invested in securities would decide whether to acquire or dispose of ANZ shares based on information “irrelevant to value”.
Justice Michael Lee – with Justice Catherine Button and Justice Brigitte Markovic – said the argument “overcomplicates statutory schemes” and would not stand up to “close analysis”.
ANZ also did not allege that Justice Moshinsky erred by failing to consider additional context and failing to properly consider what ANZ knew and understood. He also argued the judge erred in finding the information pleaded fell within the ASX listing rules.
Last October, Australian Securities and Investments Commission (ASIC) deputy chair Karen Chester said Justice Moshinsky’s decision was “important” and reaffirmed the agency’s “long-standing expectation financial supervision under which an issuer of securities must disclose to the market significant shortfalls in capital raisings.
“Investors should be fully informed of information that could have a material impact on the price or value of a security.
“In the context of capital raising transactions, ASIC expects issuers to consider the information in their possession and make appropriate disclosures to the market – particularly where the capital raising is materially undersubscribed “Chester said.
