Despite being found to have acted unconscionably, Westpac has scored a number of legal victories after splitting from the other big banks and defending ASIC's accusations of rate rigging.
The Federal Court found Westpac had engaged in unconscionable conduct and breached the ASIC Act by attempting to manipulate the bank bill swap rate (BBSW) on four separate occasions.
The court also found Westpac had breached its financial services licensee obligations through inadequate procedures and training.
However, Justice Beach found the Australian Securities and Investments Commission had not made out its case against Westpac for breaching the Corporations Act provisions against market manipulation or market rigging.
Justice Beach said, while Westpac traded with the dominant purpose of influencing the BBSW on four occasions in 2010, ASIC did not prove these were contraventions of the Corporations Act.
"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," Justice Beach wrote in his judgment.
"I likewise do not consider that establishing such a purpose for trading in Prime Bank Bills establishes a false or misleading appearance with respect to the market[s] in or price for trading of such derivative instruments."
In other words, Westpac attempted to influence the BBSW, but did not succeed.
Justice Beach noted many of the internal bank communications ASIC based its case on were open to competing interpretations and ASIC bears the onus of proof given the gravity of the allegations.
"Accordingly, where there has been uncertainty as to what was said or what was meant or conveyed after considering the context and all relevant circumstances, I have resolved that uncertainty in Westpac's favour," he explained.
In its initial reaction, ASIC said it welcomed the judgment.
"This is a very significant and positive outcome for the integrity of Australia's financial markets," the regulator noted.
More to come.