Mediation initiated by ASIC between it, the ANZ Banking Group Ltd, Merrill Lynch (International) Australia Pty Ltd and the liquidator of Opes Prime Stockbroking Limited has resulted in a proposed settlement offer: based on estimates provided by the liquidator, the settlement, if approved by creditors and the court, is expected to deliver a sum of $253 million and a return of around 40 cents in the dollar to creditors of Opes Prime, which includes investors. This return is based on the value of potential creditors claims as at 27 March 2008 when Opes Prime went into administration.
ASIC identified two potential actions available to it. The first was a potential claim for compensation due to an alleged contravention of the managed investment provisions of the Corporations Act (the Act) by Opes Prime and alleged involvement in the contravention by ANZ and Merrill Lynch. The second potential claim was a civil penalty and compensatory action against the directors of Opes Prime, and the ANZ bank.
Under the terms of the mediated settlement, ASIC has agreed, if the offer is approved by Opes Prime creditors and the Court, not to pursue these actions against ANZ and Merrill Lynch, who are parties to the settlement offer.
ASIC’s agreement to release ANZ and Merrill Lynch is subject to ASIC being satisfied with the content of the scheme documentation which will give effect to the proposed settlement, the proposed settlement being accepted by the Opes Prime creditors at a scheme meeting and approval of the scheme by the Court.
ASIC also announced that it has put in place an Enforceable Undertaking (EU) from the ANZ in relation to ASIC’s investigation into ANZ Custodial Services, a division of the ANZ Group. (see also the ANZ’s own Review Committee Report).
The EU will require ANZ to complete a program to remedy deficiencies in operational procedures across the ANZ Custodian Services business, including its securities lending operations. The program will be thoroughly reviewed by an expert who will regularly report to ASIC over the next year.
ANZ has agreed to improve compliance in various areas addressed in the EU, including to review, and where necessary, remedy:
- poor reconciliation processes;
- a breakdown in proper compliance processes;
- inadequate resourcing and risk management;
- inaccurate and delayed responses to beneficial tracing notices; and
- a poor compliance culture, meaning that deficiencies in processes were not identified, escalated or remedied in an appropriate or timely manner.
ASIC is still separately investigating the conduct of directors and officers of Opes Prime, both in relation to the operation of the business and in the period immediately prior to the collapse.
