ASIC asks Westpac: What happened to Colin ‘the Rat’ Roden?
Financial Services July 9, 2018 11:07 pm By Christine Caulfield | Melbourne

The Australian Securities and Investments Commission wants documents from Westpac Banking Corp. detailing how it disciplined rogue traders, including Colin ‘the Rat’ Roden, at the centre of a scandal to influence the benchmark Bank Bill Swap Rate.

ASIC, which won a mixed ruling in May when a Federal Court judge ruled Westpac engaged in unconscionable conduct but not rate rigging, has asked the court for an order that the bank produce documents showing its disciplinary or remedial action against Roden and eight other employees.

ASIC also wants any documents showing what remuneration the traders received in relation to the manipulative trading.

Roden, who was the star witness at the November trial in ASIC’s case against Westpac, is said to have left the bank soon after his testimony, according to the Australian Financial Review. The departure was believed to be “on mutually agreed terms,” the report said.

Group treasurer Curtis Zuber, deputy group treasurer Joanne Dawson, Sophie “The Perfumed Steamroller” Johnston, Daniel”The Bench” Park, Bryan Duignan, Mostyn Kau, Daniel Park, Satruhan Sharma and William Hosie are also named in ASIC’s July 4 interlocutory application.

The corporate watchdog also wants Westpac’s financial statements, documents showing changes in its compliance regime and communications from key management personnel to Westpac employees commenting on the court’s May 24 findings and reasons for judgment.

Justice Jonathan Beach ruled the bank’s conduct on four of the 16 alleged offending BBSW trades in 2010 was unconscionable under the ASIC Act.

“Without dwelling in the paradigm of moral obloquy, Westpac’s conduct was against commercial conscience as informed by the normative standards and their implicit values enshrined in the text, context and purpose of the ASIC Act specifically and the Corporations Act generally,” Judge Beach said.

On April 6, May 20, December 1 and December 6, 2010 Westpac traders traded with the dominant purpose of influencing yields at which the BBSW was set”, the judge said.

Westpac was also found to have breached its financial services licensee obligations under the Corporations Act by failing to have adequate procedures and training.

But the ruling was a decidedly mixed one, with Judge Beach rejecting ASIC’s case that Westpac engaged in market manipulation or market rigging.

“It is sufficient to say that I am not satisfied that the holding of the relevant dominant purpose on the said four occasions, together with the other evidence, establishes the effect or likely effect of creating or maintaining an artificial price for or under such derivative instruments,” the judge said.

ASIC also failed to establish that Westpac engaged in a general practice of rate set trading to influence the BBSW rate, the primary interest rate benchmark used in Australia.

A spokesperson for Westpac said at the time the bank was committed to cooperating with regulators “in a constructive manner including when we have a genuine difference of opinion”.

“When that occurs our aim is to resolve the difference in an open, transparent and respectful way.”

A spokesperson for ASIC said the ruling was “a very significant and positive outcome for the integrity of Australia’s financial markets”.

Legislation to reform regulation over financial benchmarks came into effect on the same week that Judge Beach handed down his judgment. The reforms include a new BBSW calculation methodology that anchors the benchmark to real transactions.

Westpac was not the only bank to face allegations by ASIC, but was the only one to go to trial. National Australia Bank, Australia & New Zealand Banking Group and the Commonwealth Bank of Australia settled similar rate-rigging claims by ASIC over the benchmark.

NAB and ANZ each paid $50 million, while CBA paid $25 million.

UBS AG, BNP Paribas and the Royal Bank of Scotland also settled with the regulator,paying a total of $3.6 million in voluntary contributions as part of their agreements, ASIC said.
Westpac is represented by Allens. ASIC is represented by Johnson Winter & Slattery. The case is Australian Securities and Investments Commission v. Westpac Banking Corporation.
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Christine Caulfield

Christine Caulfield has been a journalist for 18 years. She was most recently the Co-Managing Editor at US legal news publication Law360. Prior to that she worked as the County Court reporter for The Herald Sun. She is Co-Founder and Editor of Lawyerly.