Verdict a big blow for regulator

Justice Whelan: "None of the bail conditions apply any more, obviously. Mr [Julian] Smith is a free man."

And with those words the former director and founder of Opes Prime breathed a sigh of relief and walked away from the same court in which two other founders were jailed for their role in the $630 million collapse of the failed broker.

Laurie Emini and Anthony Blumberg were jailed in 2011 after entering a plea bargain. Part of that deal included giving evidence against Smith, who pleaded not guilty to two charges.

At the time, the Australian Securities and Investments Commission crowed about the victory, issuing a lengthy press release that the pair were "jailed following an ASIC investigation".

Commission chairman Greg Medcraft noted in the release that the regulator would continue to focus on deterring and dealing with illegal behaviour.

This time around the press release was short and devoid of any comment, saying: "ASIC today notes the not guilty verdict in the trial of former Opes Prime Stockbroking Ltd (OPSL) director Julian Smith." It was quick to point out the Commonwealth Director of Public Prosecutions prosecuted the matter.

For ASIC, the verdict is a big blow. As it prepares for a Senate inquiry into its performance, this is a case it didn't want to lose. But the elephant in the room for ASIC was always going to be a deal it struck with ANZ Bank, which played an integral role in the Opes Prime saga. The so-called deal, or enforceable undertakings, involved ANZ and Merrill Lynch writing a $226 million cheque to the Opes Prime liquidators, to enable 1200 Opes Prime creditors to receive 37¢ in the dollar. In return ASIC wiped the slate clean on all pending and future litigation against ANZ and Merrill Lynch.

While the enforceable undertakings that ASIC imposed on ANZ did not preclude ASIC from pursuing criminal investigations, the regulator felt no need to take any further action against the banks.

I wrote at the time that it wasn't a good look for ASIC to enter such an enforceable undertaking before it had completed its criminal investigations into Opes Prime. I would now add that the regulator should steer clear of doing deals for creditors. Leave it to the experts.

Opes Prime was one of the worst cases of the global financial crisis. When it collapsed it wreaked havoc on the Australian sharemarket as ANZ and other financiers, including Merrill Lynch, began selling down the broker's $1.4 billion securities lending portfolio to recover secured loans.

ANZ spent a few months investigating its securities lending business, which had been responsible for lending facilities to the tune of billions of dollars to the securities lending operators Opes Prime and Tricom.

The review concluded: "The gravity of the issues relating to the equity finance business should have been, but was not, properly brought to the attention of the chief executive and the board."

Besides a few heads that rolled, that was the end of the story.