Detailed Analysis of CBA Case in Business and Corporations Law

This report provides an analysis of a case involving the Commonwealth Bank of Australia (CBA) and allegations of market manipulation and unconscionable conduct related to the setting of the Bank Bill Swap Reference Rate (BBSW). The Australian Securities and Investments Commission (ASIC) initiated legal proceedings, claiming CBA engaged in practices to manipulate the BBSW, potentially increasing profits and minimizing losses. The report examines the legal basis for these claims under the ASIC Act 2001, specifically focusing on unconscionable conduct. It details the settlement reached between CBA and ASIC, including financial penalties and the admission of wrongdoing. The report references key articles and legislation, providing a comprehensive overview of the case's implications within the context of Australian business and corporations law. The analysis highlights the importance of ethical conduct and regulatory compliance in the financial sector.

Business and Corporations Law

Table of Contents
Summary....................................................................................................................................3
Article Analysis..........................................................................................................................3
References..................................................................................................................................4

Summary
As per the report of ABC (2018), the corporate watchdog has initiated legal proceedings
against the Commonwealth Bank of Australia (CBA) for getting involved in rigging a major
market interest rate. ASIC is claiming unconscionable conduct as well as market
manipulation regarding the involvement for settling the bank Bill Swap Reference Rate
(BBSW). It can be witnessed as a benchmark rate which is utilized by Australian financial
market to price loans (Chalmers, 2018). ASIC is alleging the CBA for trading with an
intention to affect the setting of BBSW in order to increase its profits and minimize the
losses. According to the report of news.com.au (2018), CBA agreed to disburse $25 million
to settle down the legal action brought against it over BBSW by the ASIC (Chalmers &
Chau, 2018).
Article Analysis
Subdivision C of Australian Securities and Investments Commission (ASIC) Act 2001 and
section 12CA states that a person must not indulge in any sort of trade or commerce, engage
in behaviour which corresponds to the financial services, in case the conduct is
unconscionable. The unconscionable conduct in equity involves the provisions related to the
setting aside the transactions where one party has taken unconscientiously advantage of the
disabling circumstances of the other party. In the existing purposes, the equitable
unconscionable conduct includes section 20 of ACL as well as section 12CA of ASIC Act.
CBA has been alleged to be involved in unconscionable conduct by the ASIC (ASIC, 2018).
The allegation of ASIC is that CBA was involved in trading with an intention to affect the
setting of BBSW in order to increase its profits and to minimize the losses. In addition, it was
considered as being involved in market manipulation as well. It had been revealed to be
unconscionable for CBA in order to trade in such a manner as well as it has been alleged to

be involved products pricing off BBSW without disclosing the trading practices used by it to
the customers as well as to the counterparties. Thus, ASIC claimed all these points in its
original statement to the court. It had been stated by the ASIC that if the action taken by CBA
would have succeeded, it would definitely have created false prices in the entire market
(Chalmers & Chau, 2018).
Furthermore, for getting into in-principle settlement with ASIC, it required to admit that it
had been involved in unconscionable conduct as well as in manipulating the BBSW
previously also. After it, CBA has now agreed to pay $25 million in order to settle the legal
action brought against it over the bank bill swap rates by the ASIC (Federal Register of
Legislation, 2017). However, it requires the approval for the Federal Court for the in-
principle settlement between both the parties to the legal dispute. In addition, it also implies
that CBA will need to pay an amount of $5 million of the penalty, $15 million to the financial
consumer protection fund as well as $5 million for the costs of legal action and for all other
procedures to the ASIC (Chalmers & Chau, 2018).
References
ASIC (2018) ASIC fines Commonwealth Bank over financial advice which customers never
received [online]. Available from: http://www.news.com.au/finance/business/banking/asic-
fines-commonwealth-bank-over-financial-advice-which-customers-never-received/news-
story/068480ef210773d754ee7b91d9a019bb [Accessed 15 May 2018].
Chalmers, S. (2018) Commonwealth Bank involved in rigging key market interest rate, ASIC
alleges [online]. Available from: http://www.abc.net.au/news/2018-01-30/cba-allegedly-
involved-in-rigging-key-market-interest-rate/9375832 [Accessed 16 May 2018].

Chalmers, S. & Chau, D. (2018) ASIC sheds more light on Commonwealth Bank's alleged
rate-rigging [online]. Available from: http://www.abc.net.au/news/2018-03-08/asic-files-
further-documents-in-cba-rate-rigging-court-case/9527282 [Accessed 15 May 2018].
Federal Register of Legislation (2017) Australian Securities and Investments Commission Act
2001 [online]. Available from: https://www.legislation.gov.au/Details/C2017C00128
[Accessed 15 May 2018].