Class Action Lawsuit Filed Against ANZ Over Opes Prime

Post by Sharat on December 30, 2008 · Under Business News, Company News, Equities, banking, home loans, investments · Comment

A class action lawsuit has been filed against Australian Banking major ANZ which is alleging that the lender failed to adequately disclose risks associated with loans to insolvent margin lender Opes Prime.

The lawsuit was filed on Monday by The Florida-based law firm of Vianale & Vianale LLP on behalf of purchasers of American Depositary Receipts of ANZ shares between March 2, 2007, and July 27, 2008. The legal action suggests that ANZ and its top executives violated U.S. securities laws.

In an interview with Bloomberg Kenneth Vianale the law firms principal said “ANZ really didn’t explain in its public filings its exposure to Opes Prime. Eventually the truth came out, and while the company said they were managing that risk, they really weren’t.” Mr. Vianale said that hundreds to thousands of claimants may come forward.

An ANZ spokesperson commenting on the class action law suit said “The Opes Prime matter is subject to a range of legal actions that we will be vigorously defending,”

Opes Prime, provided margin financing for its clients attracting them by offering cheap loans to buy the stock of small cap companies not part of the benchmark ASX index, financing the larger brokers were reticent to do. The stock was transferred to ANZ and Merrill Lynch as collateral and when Opes Prime failed back in March, ANZ kept the collateral to recoup the loss.

A margin account is held by a brokerage that lends customers cash to purchase securities. The loan in the account is collateralized by the securities and cash. If the value of shares drops, the account holder is required to deposit more cash or sell some of the stocks.

ANZ sacked eight workers in August after an investigation into the bank’s lending to Opes Prime. In October, ANZ more than tripled bad-loan provisions for fiscal 2008 to A$1.95 billion ($1.3 billion). ANZ shares have lost 39 percent over the period specified in the lawsuit, and have tumbled 44 percent so far this year.

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