Heavy Hitter Called In To Anz Securities In The Spotlight
The Age
Tuesday April 15, 2008
ANZ has recruited heavyweight company director David Crawford to help with an expanded review of its involvement in securities lending and its entanglement with failed broker Opes Prime.
Chief executive Mike Smith will lead the review, which will determine whether ANZ continues to lend stocks for a fee, or lends to companies that participate in securities lending. The 64-year-old Mr Crawford, who has extensive experience in risk management, serves as a financial expert on BHP Billiton's risk and audit committee and is chairman of Foster's Group and Lend Lease. ANZ's group managing director, institutional, Peter Hodgson, has completed a confidential preliminary review, which has prompted the more formal inquiry. ANZ has come under fire from clients of Opes Prime, which collapsed late last month because of potentially fraudulent transactions. Many of the clients, whose shares have been seized by the bank and other secured lenders, believed they owned the shares they held in margin-lending accounts. ANZ has sold more than 60% of the holdings, to recover about $650 million it had lent to Opes Prime. The issue is being played out in courts around the country as Opes Prime clients seek injunctions to prevent ANZ from selling certain parcels of shares. The bank was also caught when Tricom, which like Opes Prime offered margin lending and securities lending, experienced liquidity problems. A spokeswoman for ANZ last night refused to say whether it had exposure to Chimaera Capital, a Melbourne-based stock lender rumoured to be experiencing financial difficulties. Meanwhile, ANZ has suspended four employees, the latest of whom was Nick Harding, an operations manager in its securities lending division. The employees reportedly had business relationships with Opes Prime and some allegedly tried to sell their stock immediately before the broker was placed in administration. ANZ is believed to view the actions of certain staff as one-off, rogue actions, rather than a sign of internal cultural problems. In a statement, the bank said the expanded review would examine "whether any employee has breached ANZ's internal policies, procedures and ethical standards in securities lending and in dealings associated with clients including the Opes Prime Group". It will also scrutinise the bank's client relationships, including with the Opes Prime Group. When Mr Smith last spoke to investors, on April 7, he defended ANZ's right to do business with Opes Prime. "I think we all need to remember that ANZ would still be supporting this business if irregularities had not been discovered inside the company," he said. But according to yesterday's statement, community expectations and ethical considerations will play a part in ANZ's analysis of its operations. "I also intend to report publicly on the key conclusions of the review and any resulting remedial actions," Mr Smith said. Regulators, including the Australian Prudential Regulation Authority, the Australian Securities Exchange and the Australian Securities and Investments Commission, said the review was an internal affair. Commonwealth Bank, Westpac and St George yesterday confirmed they were not involved in securities lending. National Australia Bank said it had offered margin lending and securities lending to a limited number of clients since 1972. "But while National Australia does offer margin lending services directly to individual customers, it does not finance the margin-lending operations of counterparties," a spokesman for NAB said.
© 2008 The Age