The full court of the Federal Court on Wednesday (2 October) morning upheld a finding that the Australian and New Zealand Banking Group (ANZ) breached continuous disclosure obligations when it failed to disclose a $790 million overhang in August 2015.

During a 24-hour trading halt, ANZ undertook a fully written institutional share placement to raise $2.5 billion with underwriters Citigroup Global Markets, Deutsche Bank AG, and JP Morgan.

ANZ did not disclose that the underwriters would take up 31 per cent of the placement, at a value between $754 million and $790 million, either in its announcement the placement was completed or prior.

Last year, Justice Mark Moshinsky slapped the banking giant with a $900,000 penalty and opened the door to a potential class action.

The judgment relied on the Corporations Act 2001 and ASX listing rules, which provides that listed entities must immediately disclose information not generally available and that a reasonable person would expect to have a material effect on the price or value of securities.

In its appeal, filed last December, ANZ alleged Justice Moshinsky was in error when he found the pleaded information relevant to the underwriters’ placement fell within the Corporations Act and asserted it was “not relevant to the value of ANZ’s shares”.

ANZ added Justice Moshinsky erred by finding a person who commonly invested in securities would decide whether to acquire or dispose of ANZ shares on information that was “irrelevant to value”.

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Justice Michael Lee – with Justice Catherine Button and Justice Brigitte Markovic – said this argument “overcomplicates the statutory regimes” and would not withstand “close analysis”.

ANZ also failed to allege Justice Moshinsky erred by failing to consider additional context and did not properly regard what ANZ knew and understood. It also argued the judge erred in finding the pleaded information fell within ASX’s listing rules.

Last October 2023, ASIC then-deputy chair Karen Chester said Justice Moshinsky’s decision was “significant” and reaffirmed the financial watchdog’s “longstanding expectation that an issuer of securities must disclose material shortfalls in capital raisings to the market”.

“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,” Chester said.

The case is Australia and New Zealand Banking Group Limited v Australian Securities and Investments Commission [2024] FCAFC 128.