The Australian Securities and Investments Commission has won a landmark continuous disclosure case against ANZ.

In a ruling today (13 October) the Federal Court found Australia and New Zealand Banking Group Limited (ANZ) breached continuous disclosure laws when undertaking a $2.5bn institutional share placement in 2015 by failing to disclose material placement subscriptions allocated to underwriters.

ASUC said the landmark case reaffirms the importance of the continuous disclosure rules to maintain market integrity. The decision also confirms that a significant take-up of shares by underwriters in a capital raising may be considered price sensitive information requiring market disclosure.

ASIC deputy chair Karen Chester said, "ANZ failed to tell the market that the underwriters of this share placement had bought nearly a third of the shares, some $790 million.

"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.

"Proper disclosure is fundamental to fair and efficient markets and price formation.  Investors need to be fully informed about information that is likely to have a material impact on the price or value of a security. In the context of capital raising transactions, ASIC expects that issuers will consider the information in their possession and make appropriate disclosures to the market - particularly where the capital raising is materially undersubscribed." 

The Court found that ANZ contravened continuous disclosure laws by failing to notify the Australian Securities Exchange (ASX) that between approximately $754m and $791m of the $2.5bn of ANZ shares offered in an Institutional Placement was to be acquired by its underwriters rather than placed with investors.

When handing down judgment, Justice Moshinsky concluded that the information was material. Justice Moshinsky stated that he accepts "ASIC's contention that, if the pleaded 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 so doing place downward pressure on ANZ's share price."

ASIC will now make submissions on appropriate penalties. Judgment by the Court on appropriate penalties will be determined on a date yet to be set.

On 6 August 2015, ANZ had issued a release to the ASX, "ANZ announces Institutional Placement (fully underwritten) and Share Purchase Plan to raise a total of $3 billion". ANZ knew that between $754m and $791m of placement shares were to be allocated to underwriters.

On 7 August 2015, ANZ issued a release to the ASX in respect of the placement stating among other things, "ANZ today announced that it had 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". ANZ was aware, prior to this statement, that underwriters had allocated to themselves between $754m and $790m  of placement shares.

On 21 June 2019, the Court ordered that ASIC's proceedings be stayed until the hearing and final determination of the criminal proceedings brought by the Australian Competition and Consumer Commission against ANZ and Mr Richard Moscati. These criminal charges were later dropped, and the stay of ASIC's proceeding was lifted in February 2022.

The maximum penalty for a single breach of continuous disclosure laws (sub-section 674(2) of the Corporations Act) by a body corporate in 2015 was $1m. The maximum penalty increased in 2019 to the greatest of:

  • 50,000 penalty units (currently $15.65 million)
  • three times the benefit obtained and detriment avoided, or
  • 10% of annual turnover, capped at 2.5 million penalty units (currently $782.5 million).