asic anz and opes

http://business.theage.com.au/business/asics-prime-directive-will-force-huge-overhaul-at-anz-20090306-8ri2.html
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good read re the backroom stuff with asic. Interesting comments re opes client compensation

If you already knew of this/read it - apologies

disc - hold
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ASIC's Prime directive will force huge overhaul at ANZ
Eric Johnston
March 7, 2009

ANZ faces the prospect of a hefty compensation bill after an investigation by the securities regulator exposed a raft of operational shortfalls across its equities financing business, including inadequate risk management and a "poor compliance culture".

In a damning assessment of the bank's custodian services unit — which was caught out last year through its $1 billion exposure to collapsed stockbroker Opes Prime — the Australian Securities and Investments Commission has ordered ANZ to make wide-ranging overhauls to its troubled business that range from stock lending to the processing of equities trade.

The agreement is part of an enforceable undertaking signed off between the bank and ASIC yesterday that also involves the bank commissioning to undertake several independent reviews over its progress.

At the same time, bank watchdog the Australian Prudential Regulation Authority will also track ANZ's efforts to overhaul its risk management and compliance culture.

ANZ has already undertaken its own investigation into the Opes Prime debacle and last August sacked eight staff — including two top executives — and promised to overhaul its risk-management systems.

Still, ASIC has taken the matter a step further, holding out the prospect that customers caught out by failings in the custodian services business over the past two years should be entitled to compensation.

Among key findings, ASIC claimed ANZ's custodian arm had a poor compliance culture and management had failed to escalate issues and often dismissed warnings.

It found the business was inadequately staffed, lacked proper controls and had poor record-keeping.

It also concluded that ANZ had breached corporations law when it was slow to lodge substantial shareholder notices to the Australian Securities Exchange after it became the biggest investor when it seized shares in more than 100 small companies following the collapse of Opes Prime.

The undertaking marks the first time a major bank has entered into an enforceable undertaking with the nation's securities regulator.

Two years ago, AMP agreed to overhaul policies and procedures around its financial planning arm after ASIC accused it of not adequately managing conflicts of interest or disclosing fees.

Elsewhere, GE Money was forced to compensate customers and overhaul its selling practices across its insurance businesses.

Still, ANZ appears to have escaped a tougher regulatory rebuke. This suggests APRA has so far been satisfied that the problems around ANZ's risk and culture were contained in one area.

Several years ago APRA issued a damning assessment of National Australia Bank's risk systems following the bank's $360 million foreign-currency trading scandal. At the time APRA ordered NAB to operate under tighter capital restrictions until the bank had signed off on more than 80 remedial actions.

In August, ANZ chief executive Mike Smith promised to shut down the equities financing business and shake up reporting lines as part of a 13-point plan to tackle an "unacceptable" breakdown in risk controls.

He also appointed a new chief risk officer, but has delayed appointment of a new institutional banking boss to oversee the custodian services business.