The 2025 Investment Day | 2025 Family Office Summits | Family Office Circle
Investment / Alternatives Summit - March / Oct / Nov
Investment Day - March / July / Sept / Oct / Nov
Private Wealth Summit - April / Oct / Nov
Family Office Summit - April / Oct / Nov
View Events | Register
This site is for accredited investors, professional investors, investment managers and financial professionals only. You should have assets around $3 million to $300 million or managing $20 million to $30 billion.
Australia Court Orders Westpac to Pay $6.4 Million in Penalty & Legal Costs for Misconduct in $7.9 Billion Pre-Hedging Interest Rate Swap Transaction for Consortium Comprising of AustralianSuper & IFM Entities for Purchase of Majority Stake in Electricity Provider Ausgrid, Westpac Derivatives Trading Desk Generated $13.6 Million in Trading Profit with $2.4 Million Paid to Sales Team as Commission
1st February 2024 | Hong Kong
An Australia Federal Court has ordered Westpac to pay $6.4 million (AUD 9.8 million) in penalty & legal costs for misconduct in the $7.9 billion (AUD 12 billion) pre-hedging interest rate swap transaction for a consortium comprising of AustralianSuper & IFM entities for purchase of majority stake in electricity provider Ausgrid, with Westpac derivatives trading desk generating $13.6 million (AUD 20.7 million) in trading profit with $2.4 million (AUD 3.7 million) paid to the sales team as commission. Australian Securities & Investments Commission (ASIC): “The Federal Court has declared Westpac Banking Corporation (Westpac) engaged in unconscionable conduct in October 2016 when executing a $12 billion interest rate swap transaction, the largest of its kind in Australian financial market history. Westpac will pay the maximum penalty of $1.8 million in relation to the conduct, together with $8 million for ASIC’s litigation and investigation costs. Westpac’s unconscionable conduct arose when it engaged in pre-hedging ahead of an interest rate swap transaction with a Consortium comprising AustralianSuper and IFM entities. The interest rate swap related to managing interest rate risk associated with the Consortium’s purchase from the NSW Government of a majority stake in electricity provider, Ausgrid.”
“ Australia Court Orders Westpac to Pay $6.4 Million in Penalty & Legal Costs for Misconduct in $7.9 Billion Pre-Hedging Interest Rate Swap Transaction for Consortium Comprising of AustralianSuper & IFM Entities for Purchase of Majority Stake in Electricity Provider Ausgrid, Westpac Derivatives Trading Desk Generated $13.6 Million in Trading Profit with $2.4 Million Paid to Sales Team as Commission “
Caproasia Access | Events | Summits | Register Events | The Financial Centre
The 2025 Investment Day | 2025 Family Office Summits | Family Office Circle
Basic Member: $5 Monthly | $60 Yearly
Newsletter Daily 2 pm (Promo): $20 Monthly | $180 Yearly (FP: $680)
Hong Kong | Singapore
March / July / Sept / Oct / Nov
Private Equity, Hedge Funds, Boutique Funds, Private Markets & more. Join 20+ CIOs & Senior investment team, with > 60% single family offices with $300 million AUM. Taking place in Hong Kong and in Singapore. Every March, July, Sept, Oct & Nov.
Visit | Register here
10th April & 16th Oct Hong Kong Ritz Carlton | 24th April & 6th Nov Singapore Amara Sanctuary Resort
Join 80 single family offices & family office professionals in Hong Kong & Singapore
Links: 2025 Family Office Summit | Register here
March / Oct / Nov in Hong Kong & Singapore
Join leading asset managers, hedge funds, boutique funds, private equity, venture capital & real estate firms in Hong Kong, Singapore & Asia-Pacific at the Investment / Alternatives Summit. Join as delegate, speaker, presenter, partner & sponsor.
Visit | Register here
April / Oct / Nov in Hong Kong & Singapore
Join CEOs, CIOs, Head of Private Banking, Head of Family Offices & Product Heads at The Private Wealth Summit. Join as delegate, speaker, presenter, partner & sponsor.
Visit | Register here
ASIC Deputy Chair Sarah Court: ‘This is a significant outcome which assists to clarify expectations regarding pre-hedging, particularly around disclosure and consent where the pre-hedging can have a detrimental impact on the counterparty to the transaction. Appropriate conduct for pre-hedging is an issue of global significance. In this case, Westpac’s behaviour was unconscionable and exposed its client to significant risk. Westpac’s conduct was also in stark contrast with several other banks. We share the Court’s concern regarding the maximum penalty available in relation to the conduct, and note that had Westpac engaged in similar conduct today the maximum available penalty would have been significantly higher. If pre-hedging is not carried out in an appropriate manner it can be unfair, unconscionable and result in poor client outcomes. We will continue to hold participants in these markets to high standards.”
Australia Court Orders Westpac to Pay $6.4 Million in Penalty & Legal Costs for Misconduct in $7.9 Billion Pre-Hedging Interest Rate Swap Transaction for Consortium Comprising of AustralianSuper & IFM Entities for Purchase of Majority Stake in Electricity Provider Ausgrid
31st January 2024 – The Federal Court has declared Westpac Banking Corporation (Westpac) engaged in unconscionable conduct in October 2016 when executing a $12 billion interest rate swap transaction, the largest of its kind in Australian financial market history. Westpac will pay the maximum penalty of $1.8 million in relation to the conduct, together with $8 million for ASIC’s litigation and investigation costs. Westpac’s unconscionable conduct arose when it engaged in pre-hedging ahead of an interest rate swap transaction with a Consortium comprising AustralianSuper and IFM entities. The interest rate swap related to managing interest rate risk associated with the Consortium’s purchase from the NSW Government of a majority stake in electricity provider, Ausgrid.
The Court declared Westpac’s conduct was unconscionable in that:
- Westpac was aware of its client’s concern about trading prior to the swap transaction (pre-hedging) that had the potential to adversely affect the price of the swap transaction to their detriment. Every basis point increase to the price of the swap transaction would involve a cost to the Consortium of about $4.7 million;
- Despite being aware of its client’s concerns, Westpac acted on an internal plan to pre-hedge up to 50% of the interest rate risk by trading in significant volumes of interest rate derivatives in the market before the swap transaction was executed;
- Westpac failed to obtain client consent or give clear and full disclosure about the extent of its planned pre-hedging; and
- Once Westpac commenced its on-market pre-hedging trading, the Consortium could not protect itself against the risk that Westpac’s trading would increase the price of the swap transaction to the Consortium.
Westpac’s derivatives trading desk achieved a trading profit of approximately $20.7 million on the day the swap was executed (of which $3.7 million was allocated to the Sales team as commission).
The Court also declared that Westpac failed to have adequate arrangements to manage the conflict of interests between it and the Consortium and did not do all things necessary to ensure that the swap transaction was provided to the Consortium efficiently, honestly and fairly. The Court reserved its decision on whether to make an order requiring Westpac to complete a compliance programme with an independent review of its pre-hedging practices and controls, including relating to conflicts of interest management and client communications.
Download: Statement of Agreed Facts
Background
- ASIC originally alleged Westpac breached s1043A of the Corporations Act (insider trading), s12CB of the ASIC Act (unconscionable conduct) and s912A of the Corporations Act (breaches of the general obligations of an Australian financial services licensee) (21-093MR).
- Pre-hedging involves trading to hedge the risk that a firm anticipates it will acquire from a future transaction.
- The Consortium sought to enter into the interest rate swap transaction to hedge the interest rate risk associated with the money it had borrowed to fund its stake in Ausgrid. That borrowing was at variable interest rates and the Consortium wanted to protect itself from the risk of those rates increasing by converting that interest rate exposure to a fixed rate for the full term of the loan. The transaction remains the largest interest rate swap transaction executed in one tranche in Australian financial market history.
- The $1.8 million penalty is the maximum the Court could order for statutory unconscionable conduct in 2016, when the conduct occurred. At the time, a contravention of s912A of the Corporations Act did not attract a penalty.
- Civil penalties have significantly increased since 2016. The current penalty for unconscionable conduct in breach of the ASIC Act, or for a breach of s912A of the Corporations Act, is at least $15.65 million for a corporation. For a large entity, the maximum penalty may potentially be $782.5 million or three times the benefit derived (whichever is greater).
- ASIC notes that issues around pre-hedging has received significant international attention and ASIC is actively engaged on this issue at the International Organisation of Securities Commissions (IOSCO).
For Investment Managers, Hedge Funds, Boutique Funds, Private Equity, Venture Capital, Professional Investors, Family Offices, Private Bankers & Advisors, sign up today. Subscribe to Caproasia and receive the latest news, data, insights & reports, events & programs daily at 2 pm.
Join Events & Find Services
Join Investments, Private Wealth, Family Office events in Hong Kong, Singapore, Asia-wide. Find hard-to-find $3 million to $300 million financial & investment services at The Financial Centre | TFC. Find financial, investment, private wealth, family office, real estate, luxury investments, citizenship, law firms & more. List hard-to-find financial & private wealth services.
Have a product launch? Promote a product or service? List your service at The Financial Centre | TFC. Join interviews & editorial and be featured on Caproasia.com or join Investments, Private Wealth, Family Office events. Contact us at angel@caproasia.com or mail@caproasia.com
Caproasia.com | The leading source of data, research, information & resource for financial professionals, investment managers, professional investors, family offices & advisors to institutions, billionaires, UHNWs & HNWs. Covering capital markets, investments and private wealth in Asia. How do you invest $3 million to $300 million? How do you manage $20 million to $3 billion of assets?
The 2025 Investment Day | 2025 Family Office Summits | Family Office Circle
2020 List of Private Banks in Hong Kong
2020 List of Private Banks in Singapore
2020 Top 10 Largest Family Office
2020 Top 10 Largest Multi-Family Offices
2020 Report: Hong Kong Private Banks & Asset Mgmt - $4.49 Trillion
2020 Report: Singapore Asset Mgmt - $3.48 Trillion AUM
For Investors | Professionals | Executives
Latest data, reports, insights, news, events & programs
Everyday at 2 pm
Direct to your inbox
Save 2 to 8 hours per week. Organised for success
Register Below
Get Ahead in 60 Seconds. Join 10,000 +
Save 2 to 8 hours weekly. Organised for Success.
Sign Up / Register
Please click on desktop.
Caproasia Users
- Manage $20 million to $3 billion of assets
- Invest $3 million to $300 million
- Advise institutions, billionaires, UHNWs & HNWs
Caproasia Platforms | 11,000 Investors & Advisors
- Caproasia.com
- Caproasia Access
- Caproasia Events
- The Financial Centre | Find Services
- Membership
- Family Office Circle
- Professional Investor Circle
- Investor Relations Network
Monthly Roundtable & Networking
Family Office Programs
The 2025 Investment Day
- March - Hong Kong
- March - Singapore
- July - Hong Kong
- July - Singapore
- Sept- Hong Kong
- Sept - Singapore
- Oct- Hong Kong
- Nov - Singapore
- Visit: The Investment Day | Register: Click here
Caproasia Summits
- The Institutional Investor Summit
- The Investment / Alternatives Summit
- The Private Wealth Summit
- The Family Office Summit
- The CEO & Entrepreneur Summit
- The Capital Markets Summit
- The ESG / Sustainable Investment Summit
Contact Us
For Enquiries, Membershipmail@caproasia.com, angel@caproasia.com
For Listing, Subscription
mail@caproasia.com, claire@caproasia.com
For Press Release, send to:
press@caproasia.com
For Events & Webinars
events@caproasia.com
For Media Kit, Advertising, Sponsorships, Partnerships
angel@caproasia.com
For Research, Data, Surveys, Reports
research@caproasia.com
For General Enquiries
mail@caproasia.com
a financial information technology co.
since 2014
