Westpac accused of insider trading

The corporate watchdog has launched court action against the major bank for alleged insider trading over a major energy deal.

Westpac has been embroiled in yet another financial scandal, with the corporate watchdog slapping the bank with legal action for alleged insider trading.

The Australian Securities and Investments Commission (ASIC) has lodged proceedings in the Federal Court against Westpac for alleged insider trading, unconscionable conduct and breaching its financial services licence in 2016.

The accusations relate to a $12bn interest rate swap transaction with AustralianSuper and a consortium of other companies for the majority stake in Ausgrid following the energy provider’s privatisation by the NSW government.

It is the largest interest rate swap transaction in Australian financial history.

ASIC alleges Westpac’s top management in its institutional bank withheld information from the market that it would be executing the transaction.

It is then further alleged Westpac began trading knowing this information before the rest of the market.

“At about 7am on 20 October 2016, the consortium signed an agreement with the NSW government for the acquisition of Ausgrid,” ASIC said in a statement.

“ASIC alleges that by about 8.30am on 20 October 2016, Westpac knew, or believed, it would be selected by the consortium to execute the interest rate swap transaction on that morning.

“ASIC alleges this was inside information.”

The claim alleges traders working at Westpac were able to acquire and dispose of “interest rate derivative products” to better place the bank over the rest of the market before the execution of the deal was made fully public.

According to ASIC’s claims; Westpac’s then institutional bank chief executive Lyn Cobley, managing director Michael Correa and head of fixed income trading Simon Masnick knew of the alleged insider trading.

Traders Nicholas Allen, Benjamin Mitchell and Shane Dorman were also allegedly in possession of the Ausgrid information before it was made public.

“ASIC alleges that Westpac’s trading occurred while it was in possession of information that was not generally available to other market participants, including those that traded with Westpac that morning,” the regulator said.

“Prohibitions against insider trading are a fundamental tenet of market integrity.”

Westpac has acknowledged the civil proceedings and said it was considering its position on the ASIC allegations.

“The allegations relate to interest rate hedging activity undertaken during the course of Westpac’s involvement in the 2016 Ausgrid privatisation transaction,” a Westpac spokesman said.

“Westpac takes these allegations very seriously and is considering its position.”

Wednesday’s legal action is the latest scandal to rock the nation’s second largest bank following its 2019 AUSTRAC money laundering saga, which unveiled the bank had given the green light to transactions relating to human trafficking and child exploitation.

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