Possible Changes To Underwriter´s Exemption

Recently, the Treasury issued a position and consultation paper titled 'Insider Trading', which sought public comments on how the government should deal legislatively with recommendations made by the Corporations and Markets Advisory Committee (CAMAC) in its 2003 report on insider trading.

While section 1043A Corporations Act 2001 (Cth) (Corporations Act) prohibits the disposal of securities or managed investment products which would result in insider trading, section 1043C Corporations Act acts as an exemption for underwriters who are disposing of securities or managed investment products which were acquired under an underwriting agreement. There are currently no restrictions as to who such financial products can be sold.

CAMAC acknowledged the arguments contained in some submissions that implementing such a recommendation may result in higher underwriting risk and fees, and reduced availability of underwriters, and that limiting the exemption as it currently stands is therefore likely to reduce efficiency in the underwriting market and in financial markets generally.

The Treasury asked for further submissions in relation to CAMAC's recommendation as follows:

1. is there evidence that underwriters are disadvantaging counterparties by using the exemption as it currently stands?

2. is adopting CAMAC's recommendations likely to result in less underwriting capacity, increased costs or otherwise impact on an issuer's ability to raise funds?

We await to see the result of any submissions made regarding the CAMAC recommendations.

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