ASIC proceedings set to be a ‘landmark’ case
The Australian Securities and Investments Commission’s (ASIC’s) proceedings against Westpac will be a “landmark” case as it is only the third insider trading case brought against a company in Australia, with it potentially being set up as another big loss for the corporate regulator.
ASIC had commenced civil proceedings against Westpac for insider trading, related to the bank's role in executing a $12 billion interest rate swap transaction with AustralianSuper and a group of IFM entities.
There had only been two insider trading cases about against companies in Australia – an unsuccessful one against Citigroup in 2006 and a civil case against construction firm Hochtief in 2016 where it was fined $400,000.
University of Sydney Business School associate professor, Juliette Overland, said it was rare to see insider trading cases that involved companies as most were brought against individuals.
“From a legal perspective, it’s got the prospect of being quite ground-breaking by actually applying the laws that attribute insider trading to companies and getting clarity there,” Overland said.
“But the other part that makes it big is that it’s a big bank and Westpac hasn’t come out and said how they’re planning to proceed.”
Overland said it would be a big deal if the proceedings against Westpac were successful, but otherwise it would be another big loss for ASIC.
“It’s a difficult position for ASIC, because if they go after small targets which they’re often accused of doing and they win, people say ‘of course you have a win because you went after a small target’,” Overland said.
“If they go after a big target and lose, as they did with Citigroup, people will say it was a big waste of money – whatever they do, even when they do win, they get criticised.
“If it doesn’t go well for ASIC, it’s another cross against them, but they don’t have a lot of other options, other than to try and bring cases like this.
“After the Royal Commission there has been so much emphasis on the ‘why not litigate?’ approach.”
If ASIC did succeed, the impending fine would also be a controversial issue as Westpac was likely to be fined less because of the laws of the time the accusations happened.
“The conduct that has been complained about occurred in 2016 and the penalty that was in place then for a company was $1 million,” Overland said.
“But ASIC can ask for that to be applied to every single trade Westpac was engaged in, so it could be hundreds of millions of dollars.
“Because the penalties for civil breaches were increased in 2019, you can claim up to 10% of annual turnover, limited to a cap of $525 million per occurrence as well.
“It would be a much greater maximum possible penalty if the conduct had occurred now.”
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