One of my early childhood memories that I still vividly recall was my first visit to a restaurant buffet. I was astonished that you pay the same amount to cram as much food onto your plate….and then you could even go back for more. Oh, the joy! My plate was full - so full that I don’t think anything would ever come as close. Well, it has taken a while, but finally, there is a person whose plate is fuller than mine from all those years ago at the Happy Dragon restaurant.
I am of course referring to the incoming CEO of CBA, Matt Comyn. Until yesterday, his plate was replete with APRA’s independent prudential inquiry focusing on CBA’s governance, culture and accountability frameworks; AUSTRAC’s Federal Court case in regard to allegations of over 50,000 breaches of the AML/CTF Act; a shareholder class action suit over the same AUSTRAC issue; and ASIC’s investigation into the disclosure practices of it and other large financial institutions. Now add another to the list - ASIC has just launched proceedings in the Federal Court over claims that CBA rigged the BBSW.
Of course, CBA is not the first to be targeted by ASIC in regard to issues involving the BBSW. Two of the big four, ANZ and NAB, have previously settled, agreeing to pay $50 million each in pecuniary penalties; whilst Royal Bank of Scotland paid $1.6 million, UBS paid $1 million as did BNP Paribas. Westpac is awaiting judgement after it elected to defend itself in court. We will see whether Westpac’s unilateral move will pay off (no pun intended), however, transcripts reveal these hidden gems in regard to traders’ sobriquets - The Rat, The Perfumed Steamroller, Bad Kitty, The Powerful Owl. That’s right up the with Bacchus, The Keg on Legs, Whispering Death, The Turbanator and Afghanistan. (Yes, I am a cricket fan).
During the period of time in question, CBA had many financial products that were either priced or valued off the BBSW. ASIC alleges that on three specific occasions, CBA traded with the intent to affect the level by which the BBSW was set in order to maximise its profits and / or minimise its losses.
This has therefore resulted in ASIC’s allegations that CBA engaged in unconscionable conduct by trading in this manner as well as failing to disclose its trading practices with its customers and counterparties. As a flow on, CBA’s trading (allegedly) created an artificial price and false appearance in regard to the financial products. It is important to note that the legislative provisions covering market misconduct (that is, market manipulation, false trading, market rigging, false or misleading statements) only relate to financial products and services - this excludes the BBSW. Therefore, ASIC is alleging misconduct by CBA in regard to the financial products traded as a result of the incorrect BBSW price / value.
Even though the alleged behaviour occurred in 2012, the six year statute of limitations is approaching - hence the need to commence any legal action sooner rather than later.
Interesting to note that both CBA and ASIC are represented by newbies - Matt Comyn on one side and James Shipton the other.
Should you have any queries about ASIC or other issues involving compliance, licensing, or corporate governance, please contact Jeremy Danon, director of Ariel & Associates Pty Ltd on (02) 8223 3355 or at jeremy@ariel.associates.