September 14, 2018 / 7:48 AM / 6 months ago

UPDATE 2-Australia watchdog files civil suit against ANZ over 2015 share issue

* ASIC launches civil court action, citing lack of disclosure

* Lawsuit relates to A$2.5 bln share issue by ANZ in 2015

* ACCC brought criminal case against ANZ, 2 other banks in June (Recasts; comments from ASIC and analyst)

By Byron Kaye and Paulina Duran

SYDNEY, Sept 14 (Reuters) - Australia's corporate watchdog sued Australia and New Zealand Banking Group Ltd on Friday over a troubled A$2.5 billion ($1.8 billion) share placement, flexing its muscle amid criticism levied at regulators for being soft on finance firms.

The move means Australia's third-largest bank now faces two lawsuits over the 2015 capital raising. The antitrust regulator already filed criminal cartel charges against the lender and its two investment banks, Citigroup Inc and Deutsche Bank AG , accusing them of colluding over the fundraising.

In a civil court filing, the Australian Securities and Investments Commission (ASIC) said ANZ broke company laws by failing to tell investors that its underwriters had bought A$791 million of the A$2.5 billion shares it was trying to sell.

The 31 percent shortfall, "if disclosed, was information that a reasonable person would expect to have a material effect upon the price of ANZ shares," ASIC said.

"The market was deprived of information which ... should have been available to it," it added, noting that disclosure laws protected the "fair, effective and efficient operation of Australian markets (and) that purpose was frustrated by the non-disclosure".

ANZ added that it would defend the lawsuit and that its actions were "in accordance with its ASX disclosure obligations as well as market practice".

The bank has previously said it will fight a criminal case brought by the Australian Competition and Consumer Commission (ACCC) in relation to the same share raising.

The Commonwealth Department of Public Prosecutions, which is running the ACCC matter told Reuters it was not involved in ASIC's civil proceeding.

Citibank and Deutsche Bank had served as underwriters for the issuance.

The action by ASIC shows regulators are under pressure to demonstrate they are reining in the finance sector, as a powerful public inquiry airs almost daily allegations of misconduct across the consumer credit, business lending, farm finance, pension fund and insurance sectors.

As the Royal Commission has unfolded, high profile critics like the chairman of the sovereign wealth fund have accused regulators of being ineffective against the financial sector.

"They're trying to claim that they're really the ones trying to regulate financial markets, not the ACCC, that this is really their jurisdiction," said Andrew Grant, a senior finance lecturer at the University of Sydney's business school, referring to ASIC's lawsuit.

"They would probably feel like this is their domain and if they're shown up by the ACCC this is not going to make them look good." ($1 = 1.3887 Australian dollars) (Reporting by Byron Kaye and Paulina Duran; Additional reporting by Rushil Dutta in Bengaluru; Editing by Muralikumar Anantharaman)

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