Westpac is challenging the corporate watchdog’s accusations of insider trading and unconscionable conduct towards its clients over a multi-billion dollar transaction linked to the 2016 privatisation of NSW energy assets.
The bank has filed its response to legal action launched in May by the Australian Securities and Investments Commission (ASIC), over its role in a $12 billion transaction with a consortium including superannuation giants AustralianSuper and IFM Investors.
The transaction, known as an interest rate swap, was linked to the super funds’ purchase of a 50.4 per cent stake in Ausgrid from the NSW government.
ASIC alleged Westpac had inside information that it would probably be selected to execute the swaps deal, and its traders then acted on that information to position the bank in a way that could have harmed the super fund clients.
In a concise defence filed with the Federal Court, Westpac rejected ASIC’s claim, saying it did not possess inside information when it entered into the trades in question, and it was engaging in legitimate hedging activity.
It said that if ASIC was able to establish the bank held “inside information,” the information concerned the bank’s own intentions or activities, which it said was allowed under the law.
Westpac had not previously said how it would respond to ASIC’s allegations. The matter is due to appear before Federal Court Justice Michael Lee on Wednesday.
Responding to ASIC’s claim of unconscionable conduct, Westpac said its hedging was aimed at hedging its own risk position, and the super consortium was made up of sophisticated investors capable of protecting their own interests.
“Westpac’s trading in the inter-bank and futures markets to hedge that risk was not conducted for the purpose of disadvantaging the consortium but was for the legitimate purpose of hedging Westpac’s risk position,” Westpac’s defence document said.