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Australian Securities and Investments Commission fines Commonwealth Bank of Australia for reporting failures- ASIC vs CBA

By Germaine Lombardo for CEOWORLD Magazine Updated:October 14, 2009

Commonwealth Bank of Australia (ASX:CBA) (CBA) agreed to pay a A$100,000 ($91,000) penalty after the country’s securities regulator, The Australian Securities and Investments Commission said the bank was too slow last year in disclosing bad-loan costs that exceeded an earlier forecast.

The infringement relates to the alleged failure of the bank to comply with continuous disclosure obligations regarding loan impairment expenses.

ASIC alleged that the Commonwealth Bank failed to notify the stock exchange in a timely manner about an increase in its estimated bad loan provisions from 0.4-0.5 per cent of loans to approximately 0.6 per cent of loans in December last year.

The bank dumped the adviser on the botched placement, Merrill Lynch (NYSE:AXT) , blaming the broker for failing to tell investors of the higher impairments as set out under the agreement between the two. Merrill has disputed CBA’s version of events. CBA then hired UBS to sell shares.

CBA also came under fire for telling Merrill to inform only investors participating in the share placement of the higher impairments before informing the rest of the market.

The bank later said it didn’t consider the deteriorating bad debt outlook to be material information. Under Australian laws, listed companies are required to inform the market about any material news as soon as they become aware of the information.

CBA said underwriter Bank of America/Merrill Lynch had not kept investors informed. Merrill said at the time it did not agree with CBA’s version of events.

CBA then relaunched the offer next day at a lower price, with UBS as the new underwriter. The events left a bitter taste with many investors and raised questions about disclosure.

The Australian Securities & Investments Commission (ASIC) said in its statement that CBA did not disclose price-sensitive information about the charges as immediately as it should have done.

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