After consistently getting their Basel II disclosures right (or at least the best) it is interesting to see that they cannot get other disclosures right. The complete balls up of the placement on Tuesday, at least on the information out so far, really cannot be sheeted home to anyone but CBA.
The ASX rules on disclosure are crystal clear. Rule 3.1 states:
Once an entity is or becomes aware of any information concerning it that a reasonable person would expect to have a material effect on the price or vale of the entities’ securities the entity must immediately tell the ASX that information.
There are several exceptions, but none of these appear to apply here – particularly as the information was being hawked around the institutions.
I would have thought that an increase in the provisions for bad debts by 20% would have been material in this market. This means that CBA has a clear duty to disclose that information “…immediately…”. I cannot see how this duty is discharged by handing a draft announcement to Merrills in the context of a capital placement for the exclusive use of those they were making the placement to. It was not generally announced until Tuesday night.
Perhaps Merrills should have ensured that the information was more generally available (for example, by checking here) but it was not their duty to do so. They were asked to do the raising, not check the legal position and that all of the announcements had been made. For CBA to be blaming Merrills for this looks very rich indeed. CBA is covered by rule 3.1. The company secretary and the board look like they have fouled this up – badly.
It is, however, good to see a former employer of mine (UBS) has made a packet out of this. It will help (if only in a small way) with their capital ratios.