Australia & New Zealand Bank has won the first round in a test-case court battle over its sale of some shares it had seized as collateral from failed local stockbroker Opes Prime.
Opes Prime collapsed earlier this year as the global credit crunch put pressure on banks to recoup their loans, which the stockbroker used in its margin lending operation. It has gone into receivership and is being investigated by regulators.
ANZ seized shares from Opes as it moved to recover a A$616 million ($575 million) loan to the broker. It has sold many of them, but has faced court challenges from some holders. It won an injunction from a local court in early April allowing the sales to go ahead.
In the latest ruling on Friday, a judge in the higher federal court ruled against a submission by Australian investor Beconwood that ANZ should return securities Beconwood had lent to Opes.
The judge, Ray Finkelstein, rejected Beconwood's argument that it was an unsophisticated investor that did not understand a securities lending agreement with Opes.
"Beconwood borrows for, and invest millions of dollars in, share trading. It does not qualify as an unsophisticated investor," Finkelstein said.
Beconwood argued that the securities lending agreement was like a mortgage, but Finkelstein rejected that view, saying Opes did not have to hold on to those securities for Beconwood.
ANZ said it would comment later in the day. The case will continue on other legal points.
Opes Prime provided equity financing and securities lending services to institutional and private clients. Margin lending, where investors borrow money to buy stocks, has boomed in recent years as global share markets have enjoyed an extended rally.