ASIC commences insider trading civil proceedings against Westpac
The Australian Securities and Investments Commission (ASIC) has commenced civil proceedings against Westpac for insider trading, unconscionable conduct and breaches of its Australian financial services licensee (AFSL) obligations, related to the bank’s role in executing a $12 billion interest rate swap transaction with AustralianSuper and a group of IFM entities.
The transaction occurred on 20 October, 2016, and was associated with the privatisation of a majority stake in the electricity provider Ausgrid by the NSW Government and was the largest rate swap transaction executed in one tranche in Australian financial market history.
At about 7am on 20 October, the consortium signed an agreement with the NSW Government for the acquisition of Ausgrid.
ASIC alleged that by about 8:30am on 20 October 2016, Westpac knew, or believed, it would be selected by the consortium to execute the interest rate swap transaction on that morning.
The corporate regulator alleged this was inside information and when the market opened at 8:30am, whilst in possession of the alleged inside information, Westpac’s traders acquired and disposed of interest rate derivative products in order to pre-position Westpac in anticipation of the execution of the swap transaction.
ASIC alleged that Westpac’s trading occurred while it was in possession of information that was not generally available to other market participants including those that traded with Westpac that morning.
The consortium, via a special purpose vehicle, executed the interest rate swap transaction with Westpac at 10:27am.
ASIC alleged that Westpac’s trading on the morning of 20 October had the potential to impact the price of the swap transaction to the detriment of the consortium or the special purpose vehicle.
In addition to the insider trading allegation, ASIC also alleged the circumstances surrounding Westpac’s trading on the morning of 20 October, which included its failure to provide to the consortium full and informed disclosure about its intention to pre-position its trading books prior to and with notice of the execution of the swap transaction, amounted to unconscionable conduct.
ASIC sought declarations and pecuniary penalties for Westpac’s alleged contraventions s1043A of the Corporations Act and s12CB of the ASIC Act, a declaration for Westpac’s alleged contravention of s912A of the Corporations Act, and ancillary orders.
In a statement to the Australian Securities Exchange (ASX), Westpac acknowledged the proceedings and said it would not comment further as it was now a matter before court.
AUTHOR
Chris Dastoor
Recommended for you
Financial advisers are reminded to ensure their CPD is up to date with the Financial Services and Credit Panel making its second determination in a week after an adviser failed to meet the requirements.
An adviser has received a written reprimand from the Financial Services and Credit Panel after failing to meet his CPD requirements, the panel’s first action since June.
While efficiency remains a top priority for Australian advisers, State Street has revealed the profession is now juggling this desire with the need to maintain personalisation of its service offering.
A possible acquisition of data provider Iress is becoming a greater likelihood after the firm announced it is engaging with multiple interested parties.
