Business Laws: Analysis of ASIC Actions Against ANZ and Westpac

This report analyzes recent actions taken by the Australian Securities and Investment Commission (ASIC) against ANZ and Westpac, focusing on alleged breaches of business and financial regulations. The report examines ASIC's civil penalty proceedings against ANZ's Global Markets Division and Group Treasury for market manipulation related to interest rates, and against Westpac for breaches of the National Credit Protection Act 2009 regarding home loan assessments and the 'best interests duty' concerning superannuation advice. It explores the legal complexities of proving market manipulation and unconscionable conduct under the Corporations Act 2001 and ASIC Act 2001, highlighting potential financial penalties, reputational damage, and the impact on shareholders and directors. The report references relevant legislation and media releases, offering a detailed overview of the cases' implications for corporate governance, consumer protection, and the Australian financial services industry. The outcome of these cases will be very important for the companies and the financial sector in general.

Running head: BUSINESS LAWS
Business Laws
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The Australian Securities Investment Commission is Australian watchdog which governs
the functions of organizations which operate in Australia. In the recent years the commission has
been able to procure various penalties for the breach of legal provisions and Australia. The
penalties which the watchdog has been able to procure range from pecuniary penalties to
disqualifications from managing a company. However not all claims made by the ASIC
approved in the court of law but because of such claims the companies are subjected to loss of
reputation which initiates a decrease in the value of the company.
The first issue which would be analyzed by the paper is related to a civil action against
ANZ bank. The ASIC had initiated proceedings against the company at the right time after
weighing up the evidence which were available. The evidence was procured by ASIC through
various international and domestic investigations. The case is expected to initiate a severe
reaction from the involved parties as along with the millions of dollars involved with respect to
the pecuniary penalties the issue also includes loss of reputation for the bank the securities
market and regulators (The Conversation 2017).
The actions have been initiated against ANZ’s Global Markets Division and Group
Treasury for the activities it’s indulged in the period of March 2010 to May 2012. The AISC has
alleged that the company influenced the interest rates through the use of its market position
which subjected the clients of the bank to detriment and benefited the bank illegitimately. It has
been provided by ANZ that it is vigorously going to defend against the claim. The two major
areas in relation to the claim of ASIC include market manipulation and unconscionable which
are governed by the Corporation Act 2001 (CA) and ASIC Act 2001 (AA) respectively and are
difficult to prove technically.

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The concept of misleading and deceptive conduct had been removed from the scope of
commercial law after the NRMA case where Richad Talbot and Dawn Fraser on the basis of a
false and misleading prospectus representation. The areas of law have been placed now in the
provisions of the CA and AA. Although the success rate of ASIC claims are very high there have
been only a few cases where successful claims against these areas of law have been made.
Further it is even more complex to prove a claim under section 1041A of the CA. The section is
very significant and is related closely to the provisions of insider trading as provided by Section
1043 of the CA. In order to establish market manipulation a variety of factors have to be proved
individually. Such laws have been difficult to prove by many regulators in the world including
ASIC (Asic.gov.au 2017).
In case the AISC is able to prove the claim it has made against ANZ it is going to have
significant effect on the company. As it is a banking corporation the loss of reputation is going to
cause significant damage to the company. The company would be imposed with a large about of
fines by the court. An order to disqualify the directors from managing the company or any other
corporation may also be obtained by AISC in this case. The securities of the company would be
diminished in value and is likely to cause significant financial losses to the shareholders. The
regulator has also claimed implementation of a training and compliance scheme in details. The
Australian Financial Services License could also be removed by the court totally and such parts
of the company would have to prohibit operations or may be subjected to restrictive conditions,
which is likely to disrupt business heavily.
ASIC has also commenced proceedings related to civil penalties in the federal court
against Westpac banking corporation stating that the company has breached number of
provisions related to the National Credit Protection Act 2009. In the proceedings the regulator

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has made an allegation that during the period of December 2011 to March 2015 the company
was not able to properly assess whether people to whom home loans were provided could meet
the repayment responsibilities before they were made to enter into contract of home loan. It was
specifically provided ASIC that the company Westpac abided by a benchmark without
considering the real expenses which were declared by the borrowers towards assessing the
capacity of the individuals to meet the requirements of repayment. A month’s deficit could be
seen where proper assessment of the borrowers’ ability to repay the loan was made. The
company did not consider higher payments when the interest only period ended in relation to
interest only period loans when they were assessing the ability of the borrowers to repay. The
regulator has provided that it has successfully initiated proceedings against Westpac relating to
civil penalties. In addition proceedings had been initiated by the regulator against the subsidiaries
of Westpac with the allegation that they failed to comply with the best interest duty imposed on
them through both common law and the Corporation Act. All directors you have been provided
with the responsibility of managing the company have the duty to act in such a way that their
actions trigger the best interest of the company. However according to the allegations made by
the ASIC Westpac indulged in providing personal financial product advice and particularly
recommending the customers to shift their super funds into the super accounts related to Westpac
without initiating proper comparison with others (Asic.gov.au 2017).
The allegations have been strong rejected by Westpac stating that a general advice
warning was provided to the customers before any conversation was initiated and therefore no
comparison was required. The outcome of this case is going to be very important for the
company as provided by the chief executive of Westpac Brian Hartzer. ASIC in reply have
provided that if the company was to act in the best interest of the customers they must have

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provided them advice to invest in the super fans of such industries where the fees payable is
lower and the customers would get better Returns because that would have been the best interest
of the customers.
In case the regulator is able to prove before the court that the company has and has been
providing wrong advice to the customers along with not accessing the repayment capabilities of
the borrowers the company could be subjected to severe financial losses and a multi-million
dollar penalty may be imposed on it. In addition to the financial penalties the directors of the
company maybe also subjected to a disqualification order if the claim for the same is made by
the ASIC. In addition company has already suffered severe loss of reputation due to the
allegations made by the ASIC against it. As a result the customers of the company has become
agitated towards it and the share value of the company has also gone down after the allegations
have been made.
The two issues which have been discussed above are likely to be adjudged in favor of the
ASIC. However the rate at which the decisions won by the ASIC have been overturned by the
higher courts are high. It is also most likely that if a decision is made against the companies they
would make an appeal against it in the higher courts. In the recent years the ASIC have
successfully monitored the activities of the companies operating within Australia. The effect of
such monitoring have resulted in the lowering of corporate legal issues in the country and the
existing laws are taken very seriously by the corporations while discharging their functions.

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References
Asic.gov.au. (2017). 16-460MR ASIC takes action against Westpac entities in relation to the
'best interests duty' and superannuation customers | ASIC - Australian Securities and Investments
Commission. [online] Available at: http://asic.gov.au/about-asic/media-centre/find-a-media-
release/2016-releases/16-460mr-asic-takes-action-against-westpac-entities-in-relation-to-the-
best-interests-duty-and-superannuation-customers/ [Accessed 23 Aug. 2017].
Asic.gov.au. (2017). 17-048MR ASIC commences civil penalty proceedings against Westpac for
breaching home-loan responsible lending laws | ASIC - Australian Securities and Investments
Commission. [online] Available at: http://asic.gov.au/about-asic/media-centre/find-a-media-
release/2017-releases/17-048mr-asic-commences-civil-penalty-proceedings-against-westpac-for-
breaching-home-loan-responsible-lending-laws/ [Accessed 23 Aug. 2017].
Corporation Act 2001
National Credit Protection Act 2009
The Australian Securities Investment Commission Act 2001
The Conversation. (2017). ASIC v ANZ rate-rigging case will be one of epic proportions.
[online] Available at: http://theconversation.com/asic-v-anz-rate-rigging-case-will-be-one-of-
epic-proportions-55932 [Accessed 23 Aug. 2017].