At a recent Parliamentary Committee hearing ASIC chairman Greg
Medcraft delivered a strong message to anybody thinking about
insider trading. He confirmed that ASIC will continue its tough
stance against insider trading and improve the measures that were
implemented by his predecessor Tony D'Aloisio.
ASIC's approach to insider trading
Mr Medcraft stated that the corporate watchdog has the people,
systems and powers to enforce action against suspected insider
trading, and that an increase in recent convictions for insider
trading was proof of ASIC's resolve.
Mr Medcraft has been quoted as saying: "Don't even
think about it" and "Most likely if you're found
guilty you'll go to jail."
The latest ASIC annual report shows that there was double the
number of criminal convictions for insider trading or market
manipulation than for the previous year. This reflects ASIC's
commitment to achieving fair and efficient financial markets, one
of three priorities ASIC has announced for the 2011-12 financial
Recent numbers disclosed by ASIC also point to an increase in
the seriousness of insider trading, these include:
more than 27,500 tip-offs for insider trading or market
35 cases referred for formal investigation
six criminal convictions for the 2010-11 financial year
prison terms ranging from 20 months to more than four
financial penalties ranging from A$70,000 to A$1.57
The penalties are in line with the amendment to the Corporations
Act 2001 (Cth) in 2010 that increased the penalties for both
individuals and corporations in respect of insider trading and
Currently the maximum penalty for individuals for insider
trading is a prison term of 10 years and/or a fine of up to
A$495,000 or three times the value of the benefits obtained.
For corporations the maximum penalty is the greater of a fine of
A$4,950,000 or three times the benefit obtained, or 10% of the
annual turnover if the benefit obtained cannot be determined.
New industry guidelines
The Australian Financial Markets Association (AFMA) has recently
released its best practice guidelines for "Handling
Confidential & Price-Sensitive Information &
Soundings". The guidelines are designed to establish best
practice standards that will help protect investment bankers,
stockbrokers, companies and their advisers from the risks of
The new guidelines set out in detail:
how companies should approach confidentiality agreements
how to deal with people who have access to sensitive inside
how to undertake discussions with potential investors or other
interested parties when price-sensitive or inside information is
These guidelines are the first that provide a solid reference
point for the industry. The guidelines were developed in
conjunction with ASIC in response to the Commission's approach
to insider trading.
How can you protect your business?
It is important that businesses are aware of the risks of
insider trading, especially in light of the recent crackdown on
insider trading by ASIC.
With the release of industry best practice guidelines businesses
should consider revising their compliance programs to incorporate
the recommendations set out in the guidelines.
Businesses should also take strategic measures to prepare for
any investigation or prosecution by a regulator.
Middletons' Competition & Regulatory Group regularly
assists clients facing ASIC investigation into insider trading
allegations, and is well positioned to help your business develop
corporate policies to address insider trading risks and, if
necessary, respond to any ASIC investigation or prosecution.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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