The Federal Court has ruled that ANZ breached its continuous disclosure obligations when it did not inform the ASX of a $790M funding shortfall during a 2015 capital raise.
Read more: Banking on continuous disclosure…On 13 October 2023, the Federal Court handed down its decision in what the Australian securities regulator is calling ‘landmark continuous disclosure case’. The decision 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 where the capital raising is materially undersubscribed,’ concluded Ms Chester.
Continuous disclosure cases in Australia
Continuous disclosure cases are closely watched by litigation funders and insurers in Australia, where side C cover has taken a hit due to the number and quantum of class action proceedings that have been founded on such grounds.
The laws around continuous disclosures were changed during the COVID-19 pandemic. Following the passage of the Treasury Laws Amendment (2021 Measures No. 1) Act, continuous disclosure civil proceedings now require the a fault element, that is, showing ‘knowledge, recklessness or negligence’.
This is perhaps significant because plaintiffs in securities class actions typically allege that a company and/or its officers failed to comply with continuous disclosure rules when making forecasts because they failed to take into account information they ought to have regard to. An extra step is now required to show that this amounts to negligence.
Nonetheless, despite these requirements which align with UK and US approaches, ASIC’s recent win provides an optimistic outlook for plaintiff firms and litigation funders.
