In Australian Securities and Investments Commission v Westpac Banking Corporation (No 3) [2018] FCA 1701 the Federal Court imposed a penalty on Westpac of $3.3 million for engaging in unconscionable conduct as a result of manipulative trading in the Bank Bill Market contrary to section 12CC of the Australian Securities and Investments Commission Act 2001 (Cth) as in force at the time.
By reason of its inadequate procedures and training, Westpac contravened its financial services licensee obligations to act efficiently, honestly and fairly under s 912A of the Corporations Act 2001 (Cth). Background.
ASIC had sought a penalty of $58 million as described by Justice Beach:
In summary, the principal difference between the parties concerns the quantum of the pecuniary penalty. ASIC seeks a $58 million penalty with respect to 58 contraventions that it says can be identified; the $58 million is a discount on the arithmetical maximum of $63.8 million; I would also note that $59 million was originally sought in relation to 59 contraventions. Westpac pleads for a $3 million penalty with respect to 3 of the 4 contraventions that it says I have found. The $3 million is a discount on what it says to be the $3.3 million maximum. The difference between the parties is not insubstantial. The difference reflects the competing positions taken by the parties as to the legal question of what the maximum penalty is in the circumstances of the present case.
The difference principally related to whether each trade was a contravention that attracted a penalty or whether there was only one contravention for each day of affected trading. Justice Beach decided there were only 3 contraventions.
In setting the penalty he said:
parity of penalty treatment is relevant in the present case. I have given consideration to the penalties imposed upon the ANZ, CBA and NAB for like conduct. But in order to compare like with like, one must properly identify the component one is required to compare. Take the ANZ resolution as an example. There were three components to the $50 million that it was required to pay: first, $10 million as a pecuniary penalty; second, $20 million as in substance a voluntary contribution to a financial consumer protection fund albeit that it may now be enforceable; third, $20 million for costs. ..
The maximum pecuniary penalty payable under s 12GBA(1) in respect of a provision of Subdivision C or D and if the person is a body corporate, is 10,000 penalty units (s 12GBA(3), item 2). At the time of the contraventions that I am dealing with, a penalty unit was $110 (Crimes Act 1914 (Cth), s 4AA(1)). Accordingly, the maximum penalty for each contravention that I am concerned with is $1,100,000. Now I would note that the penalty unit rate has since increased, but the relevant and lower rate that I am required to apply is that which was in place at the time of the relevant conduct. If there is any perceived inadequacy, that is a function of the legislative choice made at the time. In some respects, ASIC’s artificial recasting before me of the number of contraventions appears to be designed to get around the manifest inadequacy of the then maximum penalty. Now whilst I understand the regulatory ambition driving such an attempt, I reject it. I am applying the law as it was, not what it should have been…
In summary, for the foregoing reasons, the maximum penalty that can be imposed upon Westpac for its offending is $3.3 million. Clearly this is inadequate, but there we are.
Westpac was also ordered to ensure that it has appropriate systems, policies and procedures in relation to trading in Prime Bank Bills in the Bank Bill Market concerning:
(a) adequate training of relevant staff to ensure they are instructed not to engage in trading with the sole or dominant purpose of influencing the level at which the BBSW is set;
(b) maintenance of an appropriate information barrier between the Group Treasury and Financial Markets divisions of Westpac; and
(c) explicit policies and procedures in relation to trading Prime Bank Bills in the Bank Bill Market.
