In this article, we would discuss three stocks that have been in the media discussions and investors’ radar recently due to their ongoing legal challenges. These three stocks include Westpac, Fortescue and Myer Holdings.
Westpac Banking Corporation Limited (ASX: WBC)
Westpac is one of the major banks in Australia engaged in providing financial services. The stock of the company is recognised in various indices, including S&P/ASX Dividend Opportunities Index, S&P/ASX 200 Financials (Sector), S&P/ASX 200, S&P/ASX 50, among others. The services of the bank include deposits, lending, superannuation & funds management, insurance services, leasing finance, among others.
In a media release by the Australian Securities Investments Commission (ASIC) on 28 October 2019, it was reported that ASIC’s appeal was upheld by the Court related to a ruling of Federal Court on Westpac subsidiaries.
The matter is related to WBC’s Securities Administration subsidiary & Funds Management subsidiary. The appeal had challenged Court’s decision pertaining to the meaning of personal advice in the Corporations Act, and a finding that said WBC’s subsidiaries were not engaged in providing personal advice offering.
It is now stated that the previous decision has been overturned, on grounds that WBC’s subsidiaries were engaged in providing personal advice, resulting in a breach to subsidiaries’ Australian financial services licenses and Corporations Act.
WBC also released a statement to the exchange, stating that it acknowledges the decision of the Court. It also said that the matter was related to the fifteen calls made by the company’s subsidiaries to customers.
On 30 October 2019, WBC is trading at $28.545, down by 0.64 % (as at 2:57 PM AEST). The stock has delivered a return of 17.36% on a YTD basis. Further, the stock has delivered a return of 9.32% over the past one year.
Fortescue Metals Group Limited (ASX: FMG)
Fortescue Metals Group is one of the largest resource companies in Australia, commanding a market capitalisation of ~$27.59 billion, as on 30 October 2019. It is engaged in the exploration, development, production, processing and sale of iron ore. The stock of the company is recognised in various indices, including S&P/ASX Dividend Opportunities Index, S&P/ASX 200 Materials (Sector), S&P/ASX 200, S&P/ASX 50, among others.
Legal Battle with Yindjibarndi Aboriginal Corporation (YAC)
The ongoing legal battle with Yindjibarndi Aboriginal Corporation might extend to twelfth year, reported media. Fortescue might be looking to consider other options after six Federal Court judges paved the way for YAC to place its compensation claim.
In October 2019, the company’s appeal against a previous ruling was denied by the five other Federal Court judges. In 2017, the Court had provided a view that one of the company’s mining hubs was constructed in the absence of any agreement with traditional owners, represented by YAC.
Although, Wirlu-murra Yindjibarndi Aboriginal Corporation (WMYAC) has backed the company, and the company had signed contracts with the aboriginal organisation in June this year, reported media.
On 30 October 2019, FMG is trading at $8.810, down by 1.67% (as at 2:57 PM AEST). The stock has delivered a return of 135.38% on a YTD basis. Further, the stock has delivered a return of 150.47% over the past one year.
Myer Holdings Limited (ASX: MYR)
Myer Holdings is one of the largest departmental store groups in Australia. In addition, the company has sourcing offices in China and Hong Kong. The company includes departmental stores, Marcs and David Lawrence, and sass & bride.
Class Action Suit
Recently, the company had notified that the Federal Court had given a verdict related to historical matters in connection with a shareholder class action against the company by TPT Patrol Pty Ltd.
Reportedly, the suit was related to the verbal comments made by the former CEO of the company during an analyst presentation in September 2014. It was said that the company anticipated profit growth in FY2015.
Although, the Federal Court had dismissed the claim that the representation was misleading or deceptive. The claim also cited breach of the company’s continuous disclosure at that time, which was also dismissed by the Court.
However, the Court had also said that the company was required to make an additional announcement when the company became aware of a material impact to NPAT for FY2015, resulting in lower NPAT compared to FY2014.
Therefore, the company was engaged in misleading or deceptive conduct, and breached the continuous disclosure obligations from 21 November 2014 to 19 March 2015, stated the Federal Court. Nevertheless, the Court iterated that there is no evidence that the misconduct by the company caused any damage or loss to the class member.
MYR has said that the matter is related to the historical event, and might be appealed. In addition, the company would not provide any further comments on the judgement.
On 30 October 2019, MYR is trading at $0.555 (as at 2:57 PM AEST). The stock has delivered a return of 32.14% on a YTD basis. Further, the stock has delivered a return of 19.35% over the past one year.
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