Australia: The ins and outs of insider trading (Part 2)

Corporate Update (Australia)
Last Updated: 15 February 2014
Article by Mark Burger and Andrew Crean

In our earlier client update on 4 February 2014 ( click here to view) we:

  • outlined the nature and scope of the insider trading prohibition under the Corporations Act; and
  • highlighted the extent of ASIC's recent activity and success in the prosecution of insider trading and market misconduct offences.

In this follow-on article (designed to be read in conjunction with the earlier article), we:

  • detail what types of transactions give rise to a heightened risk of insider trading;
  • highlight the importance of confidentiality and risk management in corporate transaction planning; and
  • provide practical guidance on the ways in which insider trading risks can be managed and how the reputational risk stemming from allegations of insider trading or market misconduct can be managed.


The possible contraventions of the insider trading provisions are many and varied. However, some corporate transactions give rise to a heightened risk. For example:

  • a proposed change of control transaction involving a listed entity; or
  • a proposed capital raise by a listed entity.

Using the first example, the fact that a person proposes to make an indicative, non-binding offer to engage with a listed entity regarding a potential control transaction is information that a reasonable person would expect to have a material effect on the price of the listed entity's shares. Accordingly, anyone who has knowledge of this fact is likely to be considered an "insider" for the purposes of the prohibition.

Similarly, using the second example, if a person (including any officer) has actual knowledge of a pending capital raise by a listed company (irrespective of whether details of price or timing are known) and that information is not "generally available", it may constitute "inside information" for the purposes of the prohibition.

Because of the heighted risk associated with such transactions, it is recommended that listed entities and companies dealing with listed entities in connection with potential control or capital raise transactions:

  • have strict security protocols / policies / procedures (including physical and system information barriers if necessary) in place;
  • ensure that all officers and employees understand those security protocols / policies / procedures and the reasoning underpinning them1; and
  • monitor adherence to those security protocols / policies / procedures,

so as to ensure that inside information is not inadvertently disclosed.

It is further recommended that2, where a corporate transaction is being contemplated by (or involves) a listed entity:

  • management of the potential "insider trading" risk be incorporated into the transaction planning process;
  • until the possibility of a transaction is formally announced, knowledge of the proposed transaction should be strictly limited to those that "need to know". In this regard, consideration should be given to establishing and maintaining an 'insider list' detailing:
    • members of the deal team with knowledge of the proposed transaction;
    • other staff with potential access to transaction information, but who may not necessarily access such information (i.e. staff involved in internal review committees or senior oversight roles); and
    • other staff or classes of staff who have an administrative, support or risk management function (i.e. legal, compliance, IT administration, word processing etc.) that could potentially access transaction information.
  • transaction specific confidentiality agreements (covering use of confidential information, persons to whom such information may be disclosed and conflicts of interest) should be entered with third party advisors / intermediaries;
  • deal team members should not trade (whether as principal or agent), or suggest to third parties that they should trade, in the shares of the relevant entity or entities;
  • no public comments should be made other than pre-approved statements made in accordance with the agreed media strategy. Any such public comments should be limited to a discussion of publicly released information; and
  • the listed entity should have a procedure for reviewing public comments / announcements / analyst briefings, and if inside information has been inadvertently disclosed, immediate disclosure of that information to the relevant market operator.

Whist adoption of these recommendations will not eliminate risk, they should assist in reducing the occurrence of market-sensitive leaks or breaches of the insider trading prohibition.


Certain corporate transactions give rise to a heighted risk of insider trading. The risk extends beyond personal liability for contravention of the prohibition on insider trading under the Corporations Act to reputational risk for the persons or entities affected by an alleged contravention. Consequently, the management of insider trading risk forms (or should form) an essential part of corporate transaction planning for listed entities and their advisors.

DLA Piper Australia can assist clients by advising on the scope of the insider trading prohibition (including the statutory defences), the establishment of governance protocols / development of strategies for particular corporate transactions, the establishment of training programs and providing guidance in the event of ASIC investigations.


1Ideally, officers and employees should agree to comply with the security protocols / policies / procedures in their terms of employment, and this should be reinforced in staff inductions and ongoing training.
2ASIC has not issued a current regulatory guide addressing the handling of confidential information. However, it did release Consultation Paper 128: Handling confidential information in December 2009, which contains a range of 'best practice' proposals in relation to the handling of confidential information and accordingly provides useful guidance. AFMA's 'Best Practice Guidelines for handling confidential & price-sensitive information and soundings' released in November 2011 is also a useful reference for persons handling confidential and potentially price-sensitive information.

© DLA Piper

This publication is intended as a general overview and discussion of the subjects dealt with. It is not intended to be, and should not used as, a substitute for taking legal advice in any specific situation. DLA Piper Australia will accept no responsibility for any actions taken or not taken on the basis of this publication.

DLA Piper Australia is part of DLA Piper, a global law firm, operating through various separate and distinct legal entities. For further information, please refer to

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions