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

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 here where the capital raising was materially undersubscribed,’ concluded Ms Chester.

The Court found that ANZ contravened continuous disclosure laws by failing to notify the Australian Securities Exchange (ASX) that between approximately $754 million and $791 million of the $2.5 billion 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.