Compliance: Theory and Practice in the Financial Services Industry
3. Insider Trading and Chinese Walls
|Inhouse Home||Compliance Course||Visit the Library|
IMPORTANT NOTE: These slides have been provided primarily for the use and benefit of students taking the "Compliance: Theory and Practice in the Financial Services Industry" course at Sydney University Law School. They are a summary only of the subject matter covered and are not intended to be, nor should they be relied upon as, a substitute for legal or other professional advice. In particular, it should be noted that the slides are not always verbatim quotes from the underlying source material and that material may have been abridged or paraphrased for presentational purposes. There also may have been legislative, regulatory or other developments since these slides were last updated that are not incorporated.
These slides are made available without the assumption of a duty of care by Inhouse Legal Solutions Pty Limited ("ILS") or the officers, employees or agents of ILS who were involved in their preparation and without any representation or warranty as to accuracy or completeness. Your use of these slides is subject to the terms and conditions set out on our Legal Notices page.
These slides were created with Microsoft FrontPage 2002 and are best viewed with Internet Explorer 6.0+.
|The Insider Trading Prohibitions|
|The Chinese Wall Defence|
|Other Exceptions and Defences|
|ASX Market Integrity Rules|
|The Position in the US|
|Continuous Disclosure Rules|
|Issues for Discussion|
|CA s1043A(1) – Prohibition Against Dealing or Procuring|
|(a)||a person (the insider) possesses inside information; and|
|(b)||the insider knows, or ought reasonably to know, that the matters specified in paragraphs (a) and (b) of the definition of inside information in s1042A are satisfied in relation to the information;|
|the insider must not (whether as principal or agent):|
|(c)||apply for, acquire, or dispose of, relevant Division 3 financial products, or enter into an agreement to apply for, acquire, or dispose of, relevant Division 3 financial products; or|
|(d)||procure another person to apply for, acquire, or dispose of, relevant Division 3 financial products, or enter into an agreement to apply for, acquire, or dispose of, relevant Division 3 financial products.|
Without limiting the meaning that the expression "procure" otherwise has, if a person incites, induces, or encourages an act or omission by another person, the first-mentioned person is taken to procure the act or omission by the other person (s1042F).
Note that anyone can be an insider. The notion that applies under the laws of many other jurisdictions, that an insider must be someone connected with, or acquire the relevant information as a result of a connection with, the relevant body corporate (ie someone "inside" the body corporate), has not applied under our law since 1991.
Once you possess inside information in relation to particular securities and you know or ought reasonably to know that it is inside information, as defined, you cannot trade or procure someone else to trade in those securities, either as principal or as agent. This applies regardless of whether your trading is motivated by the inside information or some other reason.
This aspect of s1043A was confirmed in R v Farris  WASC 251, at paragraphs 173-178:
"An offence against s 1043A does not require that it be shown that there was any causal connection between possession of the information and the decision to sell the shares. It may be that a person who commits the offence has some legitimate reason for wanting to sell his shares and the fact that he is in possession of information which gives him an advantage over other participants in the market is not material to his decision. Motive or use are not elements of the offence, though they may be relevant to sentence.
The effect of s 1043A is to create a class of persons who by reason of their possession of inside information are prohibited from trading: Mansfield v The Queen .... If a person possesses information, that he knows is not generally available and is price sensitive, the prohibition on trading will apply whether or not he consciously brings to mind that information and its nature at the time he makes a decision to trade in shares. The reason for the alternative between 'knows' and 'ought to know' is not to deal with lapses of memory or a failure to recall the true nature of the information possessed but to deal with the situation where a person possesses inside information and fails to appreciate that it is not generally available or price sensitive where the objectively available circumstances should have led them to that conclusion.
If an offender possesses inside information it does not matter that he was not consciously aware of that information when placing an order. A person possesses information that is in his memory even when he is not consciously thinking of it. The knowledge element in s 1043A(1)(b) relates to the act of possession not to the point of sale. It requires that the person know or ought to know that the information he possesses has a certain quality. That is, the person is aware or ought to be aware that the information is price sensitive and not generally available at the time he acquires it or at some point thereafter and before he trades.
It is clear from the structure of s 1043A(1) that the element of knowledge relates to the circumstance of possession. The elements of possession and knowledge follow sequentially and are then separated from the element of disposal by the words 'the insider must not'. This structure is consistent with an interpretation that once possession and specific knowledge of the nature of the information is established the prohibition on disposal applies. This construction is put beyond doubt by the fact that s 1043A(3) provides that the fault element in s 1043A(1)(b) is the fault element for the physical element of possession. Accordingly, even assuming that knowledge requires awareness, it would be sufficient to meet that requirement that the offender had an awareness that the information he possessed was not generally available and was price sensitive prior to placing his order. The section does not require that he bring the information and its nature to mind at the precise point in time that the order is placed ...
The defence submission that the element of knowledge requires that the offender be consciously aware of the nature of the information that he possessed at the moment in time that he placed orders to sell shares is misconceived. For the reasons I have stated such an interpretation is inconsistent both with the structure of s 1043A and its purpose. It would be all too easy for a person charged with such an offence to claim that they had other reasons for wishing to sell their shares and did not consciously bring to mind the nature of the information that they possessed. Whilst a person might still be convicted in such circumstances on the basis that they ought to have known, the ease with which they could avoid the more serious form of the offence reinforces the interpretation I have reached.
As I have noted earlier, that is not to say that use of the information or motivation in selling are not relevant to sentence. A person who sells shares in order to unfairly take advantage of inside information is clearly more culpable than a person who, whilst prohibited from trading because of the information he possesses, has other legitimate and pressing reasons for selling his shares. The outcome may be the same but the level of moral culpability is different. It may be difficult to determine after the event what motivations a person had and their claims in that regard have to be treated with caution. But there can be some objective indicators - the existence of other reasons to trade, when the decision to trade was made and whether there were any efforts to conceal the fact of trading. The state of mind of the offender at the relevant time may also be relevant."
The effect of s1043A, therefore, is that if you are a broker and come into possession of inside information about a security, you are absolutely prohibited from trading in that security, not only for yourself but also for clients. This applies even if you are acting on a specific instruction from the client and the client doesn’t know the information and you don’t pass it on to them. It even applies if your client is trading against the inside information (ie you have "good" information but the client is placing an order to sell or you have "bad" information but the client is placing an order to buy).
In my view, the drafting of s1043A is far too broad. As I commented on page 23 of Lewis, A Decade On - Reforming the Financial Services Law Reforms, delivered at the 6th Annual Supreme Court Corporate Law Conference in August 2011:
"... our insider trading laws ... breach a cardinal principle of good regulation, namely, that a law should be drafted no more widely than is necessary to prevent the evil it is intended to stop. Those laws currently apply where the person doing the trading is not an "insider" and has not acquired their information from an "inside source". They apply where the person doing the trading is not actually using their informational advantage for the purposes of their trading (for example, they apply to someone who has "bad" information and despite that is buying, or someone who has "good" information and despite that is selling, even though they do not profit from their inside information and no-one is harmed by their trading). It has been held that they apply (at least in civil, rather than criminal, cases) to an off-market trade where both parties to the trade know the same inside information and neither is harmed by the trading. I have even heard it suggested that they apply to trading in shares in private companies, notwithstanding that such trading has nothing to do with the rationale usually put forward for having insider trading laws (namely, protecting the integrity of public markets). Hence it has been suggested that the usual rule of caveat emptor no longer applies in such sales and a vendor of shares in such a company has a legal duty to disclose to the purchaser all information that investors would consider material in determining the value of the shares in the company, or else breach s1043A when they sell."
On the meaning of "agreement to acquire", see R v Evans and Doyle (1999) VSC 488.In that case, Doyle, an institutional dealer, was aware from a client relationship that company X was going to announce a major nickel discovery that day and that the announcement was due to take place at 2pm. Company Y had a nearby mining tenement and the effect of the announcement would be likely to increase its market price. He passed that information on to Evans, a director of two private companies, and they agreed that Doyle would instruct his SEATS operator to buy shares in Y for those companies shortly after 2pm. The announcement was delayed but the instructions were issued to the SEATS operator as planned shortly after 2 pm. Evans and Doyle were both indicted for insider trading. In a post-trial action to strike out the indictment, the court found that the indictment had been wrongly drawn. It had assumed that an agreement to buy was made when the instructions were given to the SEATS operator and the trial had focussed on people’s state of knowledge and whether information was generally available at that time. The court said that this was wrong and that the agreement to buy was entered into at the time the SEATS operator executed the order on-market and it was knowledge and price sensitivity at that time that needed to be established. As there had been such a delay in the trial, the court, in the exercise of its discretion, declined leave to allow the prosecution to amend the indictment.
|On the meaning of "acquire" and "dispose", see DPP v Fysh  QSC 216, holding that shares in a listed Australian company are acquired by the buyer and disposed of by the seller for the purposes of s1043A when a transfer of the shares takes effect from the seller to the buyer in accordance with the ASX Settlement Operating Rules. That case involved an application by the Crown for an order under the Proceeds of Crime Act 2002 restraining a UK resident who allegedly violated insider trading laws from disposing of the proceeds of his crime. He had instructed a broker in Melbourne to buy shares in a Queensland-based company his UK employer was considering making a takeover bid for, and to sell shares in another Queensland-based company that his UK employer had ruled out making a takeover bid for. The case was brought before the Queensland Supreme Court and the question in issue was whether the court had jurisdiction to make the order. For the court to have that jurisdiction, some part of the relevant criminal conduct had to have occurred in Queensland. The court found that no part of the criminal conduct occurred in Queensland. Fysh acquired/disposed of the shares in question within the meaning of s1043A when the transfers took effect according to the ASX Settlement Operating Rules. Under those rules, this happened when ASX Settlement deducted the shares in question from the CHESS holdings of the seller and that occurred in Sydney. The court said that if it was wrong in reaching that conclusion, Fysh acquired/disposed of the shares in question only when the name of the buyer of the shares was entered on the relevant company's share registers and that occurred on ASX Settlement entering the name of the buyer on the company's CHESS subregister. Again, that occurred in Sydney. Accordingly, the court found that the matter should be transferred to the NSW Supreme Court for consideration. Note that the accused in that case was ultimately found not guilty of insider trading: see Fysh v R  NSWCCA 284.|
|CA s1043A(2) – Prohibition Against Tipping|
|(a)||a person (the insider) possesses inside information;|
|(b)||the insider knows, or ought reasonably to know, that the matters specified in paragraphs (a) and (b) of the definition of inside information in s1042A are satisfied in relation to the information; and|
|(c)||relevant Division 3 financial products are able to be traded on a financial market operated in this jurisdiction;|
|the insider must not, directly or indirectly, communicate the information, or cause the information to be communicated, to another person if the insider knows, or ought reasonably to know, that the other person would or would be likely to:|
|(d)||apply for, acquire, or dispose of, relevant Division 3 financial products, or enter into an agreement to apply for, acquire, or dispose of, relevant Division 3 financial products; or|
|(e)||procure another person to apply for, acquire, or dispose of, relevant Division 3 financial products, or enter into an agreement to apply for, acquire, or dispose of, relevant Division 3 financial products.|
Particular Division 3 financial products that are ordinarily able to be traded on a licensed market are taken to be "able to be traded" on that market even though trading in those products on that market is suspended by action taken by the market licensee, or is contrary to a direction given to the market licensee by ASIC under s794D(2) or 798J(2) (s1042E).
ICAL Ltd v County Natwest Securities Aust Ltd (1988) 6 ACLC 467 demonstrates the potential breadth of the tipping prohibition. In that case, Transfield made an on-market takeover bid for ICAL through County Natwest Securities. ICAL challenged Transfield’s disclosure statement for the bid. Transfield counterclaimed for an injunction against ICAL to restrain it from seeking rival bidders while certain allegedly price sensitive information that it had given to a potential "white knight" was not generally available. The information in question comprised ICAL profit projections, information that the market value of some of ICAL's assets significantly exceeded their book value and information about the selling intentions of a major shareholder. The basis for the injunction was supposedly to prevent a breach of the tipping prohibition (the implication being that ICAL would give potential rival bidders access to this allegedly price sensitive information in order to encourage them to buy ICAL shares and defeat Transfield's bid). The court appeared to accept that passing on non-public information to a potential white knight in a takeover situation, who could then be expected to use the information to buy shares in the target, technically would breach the prohibition. However, it expressed some doubts about whether the information in this case was in fact price sensitive. It also noted that the information probably had been made public already by having been filed in court. In any event, the court said that in the exercise of its discretion it would decline to issue an injunction in these circumstances because the directors, by seeking alternative bidders, were acting in the interests of ICAL's members.
|CA s1042B – Jurisdictional Reach|
|This Division applies to:|
|(a)||acts and omissions within this jurisdiction in relation to Division 3 financial products (regardless of where the issuer of the products is formed, resides or located and of where the issuer carries on business); and|
|(b)||acts and omissions outside this jurisdiction (and whether in Australia or not) in relation to Division 3 financial products issued by:|
|(i)||a person who carries on business in this jurisdiction; or|
|(ii)||a body corporate that is formed in this jurisdiction.|
|CA s1042A(1) – What are Division 3 Financial Products?|
|Division 3 Financial Products =|
|•||Interests in a managed investment scheme|
|•||Debentures, stocks or bonds issued or proposed to be issued by a government|
|•||Superannuation products, other than those prescribed by the regulations|
|•||Any other financial products that are able to be traded on a financial market|
In Exicom Pty Ltd v Futuris Corporation Ltd (1995) 13 ACLC 1758, the court expressed the view that the references to securities in the insider trading regime that preceded s1043A meant securities that had already been issued and therefore the insider trading prohibition did not extend to an issue of securities. In that case, Exicom needed new equity capital and approached 2 parties X and Z, supplying them with confidential information about its financial affairs. X used the information to buy shares on market with a view to acquiring a pre-bid stake. Exicom sought and was granted an interim injunction against X to stop it acting in breach of the predecessor to s1043A. Exicom then proposed issuing shares to Z. X sought an injunction restraining the issue to Z arguing that Z was also an insider and that what was sauce for the goose should also be sauce for the gander. The court refused to grant the injunction. It said that a company could not be an insider in relation to its own securities for the purposes of the predecessor to s1043A. That is probably correct in relation to subscriptions when you look at the prohibition in s1043A(1) (there is no express prohibition against issuance) and the recovery regime in s1043L (there is no express right for an applicant to recover against the issuer). Query whether it is correct in relation to buy-backs. The court also said that shares that have not yet been issued are not securities for these purposes. This latter ruling made the references to "subscriptions" in the predecessor to s1043A (and, if it is followed in relation to s1043A, would make the references to "applications" in that section) otiose and for that reason must be doubted.
In Joffe v R  NSWCCA 277, the NSW Court of Criminal Appeal confirmed that contracts for difference (CFDs) are Division 3 financial products.
|CA s1042A(1) – Definitions|
|(a)||matters of supposition and other matters that are insufficiently definite to warrant being made known to the public; and|
|(b)||matters relating to the intentions, or the likely intentions, of a person.|
|Inside information means information:|
|(a)||which is not generally available; and|
|(b)||if it were generally available, a reasonable person would expect it to have a material effect on the price or value of particular Division 3 financial products.|
|Relevant Division 3 financial products, in relation to particular inside information, means the Division 3 financial products referred to in paragraph (b) of the definition of inside information.|
In ASIC v Citigroup Global Markets Australia Pty Limited (No. 4)  FCA 963, the court held that an uncommunicated supposition can constitute "information" for these purposes but found that the alleged supposition that underpinned the first insider trading allegation against Citigroup (namely, that Manchee, its proprietary trader, had traded in Patricks shares after he had made the supposition that Citigroup was acting for Toll in relation to the takeover of Patricks) had not been made out on the facts.
In Mansfield v The Queen  HCA 49, the High Court held that "information" for these purposes can include false information.
|CA s1042C - Information Generally Available|
|Information is generally available if:|
|(a)||it consists of readily observable matter;|
|(b)||both the following apply:|
|(i)||it has been made known in a manner that would, or would be likely to, bring it to the attention of persons who commonly invest in Division 3 financial products of a kind whose price or value might be affected by the information; and|
|(ii)||since it was so made known, a reasonable period for it to be disseminated among such persons has elapsed; or|
|(c)||it consists of deductions, conclusions or inferences made or drawn from (a) and/or (b)(i).|
|Examples: R v Firns (2001) NSWCCA 191; Kinwat Holdings Pty Ltd v Platform Pty Ltd (1982) 1 ACLC 194; SEC v Texas Gulf Sulphur Co (1968) 401 F.2d 833.|
What is "readily observable" for the purposes of (a) above? In R v Firns, a subsidiary of a listed company with a mining tenement in PNG challenged a regulation that had the effect of limiting the minerals the subject of its tenement. The PNG Supreme Court upheld the challenge in a judgment delivered on a Friday morning. E, an executive present at the court hearing, bought shares in the company shortly after the judgment was handed down. Another executive director of the company, upon receiving news of the judgment, conveyed the news to his son, F, who immediately bought shares in the company using his wife’s maiden name. Information about the judgment was not released by the company to the market in Australia until the following Monday morning. E and F were both charged with insider trading. E was acquitted with the judge directing the jury that readily observable meant observable anywhere. In a separate trial, F was convicted with the judge directing the jury that readily observable meant observable by someone in Australia. F appealed and his conviction was overturned. The court said that there was no warrant for introducing a territorial component to this section. It said that readily observable meant readily observable by anyone anywhere. While not relevant to this case, the court said that information did not have to be readily observable by the human senses unaided and that you could take account of information available via the web, TV, telephone, fax etc. It also said that information could be readily observable even if no one in fact observed it. In this case, the court said that the information embodied in the PNG Supreme Court judgment was available, understandable and accessible to a significant group of the public – ie those present in open court. It added that the fundamental principles of open justice are based on the assumption that everything that happens in open court is capable of being observed and reported upon, thereby ensuring continuing accountability. Accordingly, the court found that a judgment in open court is readily observable even if time will inevitably elapse before the profession or the market generally learns about it and absorbs its effect.
For a discussion of some of the ramifications of the decision in Firns, see '4A. R v Firns and readily observable matter' and '4B. The impact of Firns on our continuous disclosure laws' in Lewis, A Decade On - Reforming the Financial Services Law Reforms.
Conversely, in ASIC v Macdonald (No 11)  NSWSC 287 (a continuous disclosure case involving James Hardie), the Supreme Court of NSW held that information on an ASIC register that might, on payment of a fee, be searched and might reveal relevant information if the searcher was sufficiently astute to consider name changes and conducted a search for the ABN of one of the James Hardie subsidiaries, was not readily observable matter even though it was recorded in a public register. The court noted (at para 1133) that: "The legislation aimed at preventing selective disclosure of market sensitive information should not be understood as treating as readily observable a complex series of filings by a private company that had changed its name on a number of occasions."
When is information brought to the attention of investors, as per (b)(i)? In Kinwat Holdings Pty Ltd v Platform Pty Ltd, P, which held 28.3% of the shares in W and had 4 common directors, had made a takeover bid for W. The common directors were aware of a valuation of W’s real estate assets indicating that they were worth much more than their book value. The plaintiff sued for an order restraining the bid on the basis that it would breach the insider trading prohibition. Before the hearing of the case, P’s parent wrote to the Sydney Stock Exchange disclosing the plaintiff’s allegations of under-valuation and this was then the subject of an article in a Brisbane newspaper the next morning. The court held that the letter to the Exchange plus the news article meant the information was now generally available and therefore there was no point granting the injunction.
The requirement in (b)(ii) legislates the principle established in the leading US insider trading case of SEC v Texas Gulf Sulphur Co. That case involved officers of a corporation purchasing shares and options in the corporation knowing that it had made a very significant mineral discovery. An announcement of the discovery was made to a press conference starting at 10 am, which was reported on Merrill Lynch’s private wire service at 10.29 am and the Dow Jones ticker tape at 10.54 am. One of the officers placed an order to buy with a broker immediately before the announcement, and another immediately after the announcement, at 10 am. It was held that the information was still inside information at the time the trades were done. The minimum the officers should have waited was until the information was disseminated over the Dow Jones ticker tape.
Some defendants in insider trading cases have sought to argue that the information they had was generally available, and therefore not inside information, because it was already circulating the market in the form of rumours or speculation by research analysts. For example, in R v Hannes  NSWCCA 503, Hannes, a Macquarie employee working in its corporate advisory area, was charged with, and ultimately found guilty of, insider trading in TNT options. At the time, Macquarie had a defence mandate for TNT and was in discussions with a number of potential acquirers, including the ultimate acquirer, the Dutch Post Office. Hannes was aware that a takeover offer by the Dutch Post Office was imminent at the time he purchased the options. Hannes' counsel produced a number of contemporaneous research reports by analysts speculating that TNT was a likely takeover target. This included a report by a Macquarie research analyst. There was evidence that an executive director from Macquarie’s corporate advisory area involved in the defence mandate had seen a draft of the research report and had discussed it with the analyst before it was published. The evidence showed that the analyst had modified his research report following those discussions to increase the target price for TNT shares and to remove a reference to the Dutch Post Office from the list of potential acquirers (demonstrating, amongst other things, a serious lack of understanding of proper Chinese wall protocols by both the executive director and the analyst involved). Hannes' counsel tried using this to argue that information about the likely takeover was publicly available, because it was reflected in the Macquarie research report. This was rejected by the court at first instance and on appeal (see especially paras 300 - 304 of the Appeal Court decision) and rightly so, since Hannes clearly had more direct knowledge of the takeover than was conveyed in the research report.
Similarly, in Catena v ASIC (No 2)  FCA 865, a broker who was the subject of a banning order for soliciting clients to buy shares in a company that was about to be the subject of a takeover offer, tried to argue on appeal that there was evidence of market rumours speculating that the company was a likely takeover target and therefore information about the takeover was generally available. Again that argument was rejected because the broker had more direct and accurate information about the takeover than was reflected in the market rumours.
|CA s1042D - Material Effect on Price or Value|
|For the purposes of this Division, a reasonable person would be taken to expect information to have a material effect on the price or value of particular Division 3 financial products if (and only if) the information would, or would be likely to, influence persons who commonly acquire Division 3 financial products in deciding whether or not to acquire or dispose of the first-mentioned financial products.|
When s1042D and the definition of "inside information" in s1042A refer to "particular Division 3 financial products", do they mean the particular products actually being traded or products of that class generally. The Exicom and Westgold cases mentioned below hold that it is the former, while the Ampolex case suggests that it is the latter.
In Exicom Pty Ltd v Futuris Corporation Ltd (1995) 13 ACLC 1758, above, another reason the court refused to grant the injunction was that it found that the reference to material effect on price or value of securities in the former law meant the particular securities being traded and not securities generally and as both the company and Z were privy to the relevant information and negotiating the price for the shares in question, one could assume the effect of the information would be factored into the price for the shares and that the price would not have changed if the information had been made generally available.
In Westgold Resources NL v St George Bank Ltd  WASC 352, St George Bank took an assignment of a put option against Westgold and purported to exercise it. Westgold challenged the exercise on the basis that the assignment was invalid, the exercise notice was not in accordance with the terms of the put option deed and also that the Bank was in possession of inside information at the time and therefore could not exercise it. The court upheld the first 2 arguments but rejected the third, saying:
"The astonishing proposition underlying this aspect of the plaintiff's case is that to exercise a put option granted 11 months previously requiring the optionor to purchase shares at 40 cents at a time when the shares are trading on the market at 10 cents will amount to insider trading if the optionee has insider information which if generally known, would depress the share price even further. There could not be the remotest connection between information which might adversely affect the market price of shares trading at 10 cents and a decision to exercise a put option at 40 cents. Another way of putting this is to say that the insider information did not affect the price of the securities in question, that is, the securities to be delivered under the put option. The price of those securities was set by the terms of the put option at 40 cents and that price could not be affected by insider information … Even if it is the case that no causal link need be shown between the transaction and possession of insider information, the circumstances prevailing in this case are such that I would have declined to grant any discretionary relief under the Law …"
|Ampolex Ltd v Perpetual Trustee Company (Canberra) Ltd (No 2) (1996) 14 ACLC 1514 was a summary dismissal action. It involved a dispute about the terms of certain convertible notes issued by Ampolex. There was a hitherto undiscovered error in the drafting of the convertible notes trust deed which could be read as meaning that the conversion ratio was 6.6:1 rather than the intended 1:1. The holder of the notes sold them to a group of brokers and investors, 2 of whom then made an announcement to the ASX that they believed the correct conversion ratio was 6.6:1 and that was what they were expecting to receive on conversion. Ampolex sued for damages arguing that knowledge of the intended ASX announcement was inside information and that the parties had engaged in insider trading when the note was sold. All the parties to the trade were aware of the relevant information and so they applied for summary dismissal of the action. The court refused to dismiss the case, saying that its prima facie view was that the information could be expected to have the requisite effect on price or value. While it did not specifically address the issue of which securities had to be affected, it is implicit that it was talking about securities generically and not the convertibles notes actually sold in this case. It is submitted that this is a bad decision. The application for summary judgment should have been granted. Exicom should have been followed on this point, but it was not even referred to in the judgment.|
|CA s1042G - Imputation of Information to Bodies Corporate|
|•||A body corporate is taken to possess any information which an officer of the body corporate possesses and which came into his or her possession in the course of the performance of duties as such an officer.|
|•||If an officer of a body corporate knows or (for the purposes of s1043M(2)(b)) ought reasonably to know any matter or thing because he or she is an officer of the body corporate, it is to be presumed that the body corporate knows or ought reasonably to know that matter or thing.|
|•||If an officer of a body corporate, in that capacity, is reckless as to a circumstance or result, it is to be presumed that the body corporate is reckless as to that circumstance or result.|
CA s1042G(2) provides that s1042G does not limit the application of s769B in relation to Division 3. The latter section deals generally with the liability of principals (including bodies corporate) for the conduct of their agents, officers and employees.
The intention and effect of s1042G is to preclude a body corporate from trading in Division 3 financial products where any "officer" of the body corporate is in possession of inside information about the products, unless the body corporate can rely on the Chinese wall defence in s1043F or one of the other exceptions or defences mentioned below. There is a serious problem, however, with the changes made to the definition of "officer" by the CLERP 9 amendments in 2004 and their impact on s1042G. Those changes were intended to delineate better the legal responsibilities of corporate officers from employees. The definition of "officer" of a corporation in s9 was changed so that it only applied (relevantly) to a director, secretary or a person who: (a) makes, or participates in making, decisions that affect the whole, or a substantial part, of the business of the corporation; (b) has the capacity to affect significantly the corporation’s financial standing; or (c) in accordance with whose instructions or wishes the directors of the corporation are accustomed to act. Previously, "officer" had been defined in s82A in relation to a body corporate to include a director, secretary, executive officer or employee of the body. In making this change, the draftsperson appears to have forgotten about s1042G and so the result is that the section no longer works as intended.
Prior to the CLERP 9 amendments, s1042G operated so that if, for example, employees of a financial services organisation's corporate advisory team were working on a material non-public transaction in particular securities (eg a takeover), the entire organisation, including the stockbroking arm, would be precluded from trading in those securities, both for the house and for clients, unless there was a proper Chinese wall around the corporate advisory team.
With the CLERP 9 amendments, this now only applies where an "officer" of the body corporate is in possession of the inside information.
The fact that this was a drafting error and not a deliberate policy decision is more than amply demonstrated by the continuing references to employees in both the body corporate Chinese wall defence (s1043F) and in the body corporate "own intentions" defence (s1043I(2)), both of which assume that the knowledge of mere employees is still imputed to a body corporate. Similarly, the fact that, for partnerships, the knowledge of employees is imputed to all of the partners (s1042H below) would also suggest that this was a drafting error.
This issue was highlighted, without counsel or the court seemingly recognising it as a drafting error, in ASIC v Citigroup Global Markets Australia Pty Limited (No. 4)  FCA 963. In that case, one of the number of grounds on which the first insider trading allegation against Citigroup was dismissed, was that the employee alleged to be in possession of insider information (Manchee, the proprietary trader) was not an "officer" of Citigroup and therefore his knowledge could not be attributed to Citigroup. However, the second allegation of insider trading passed that hurdle (although it failed on others) because the persons alleged to be in possession of inside information included persons who were plainly officers of Citigroup (the CEO and the Heads of Equities and ECM).
For a more detailed discussion of this issue, see '4C. Issues with the attribution of inside information to bodies corporate' in Lewis, A Decade On - Reforming the Financial Services Law Reforms.
At some point, presumably, Parliament will get around to fixing up this drafting error.
|CA s1042H - Imputation of Information to Partnerships|
|•||A member of a partnership is taken to possess any information:|
|•||which another member of the partnership possesses and which came into the other member's possession in the other member's capacity as a member of the partnership; or|
|•||which an employee of the partnership possesses and which came into his or her possession in the course of the performance of duties as such an employee.|
|•||If a member or employee of a partnership knows or (for the purposes of s1043M(2)(b)) ought reasonably to know any matter or thing because the member or employee is such a member or employee, it is to be presumed that every member of the partnership knows or ought reasonably to know that matter or thing.|
|•||If a member or employee of a partnership, in that capacity, is reckless as to a circumstance or result, it is to be presumed that every member of the partnership is reckless as to that circumstance or result.|
This has the same effect as s1042G except in relation to partnerships (save that it extends the imputation of knowledge to all employees and not just to "officers"). Essentially, a partnership will be precluded from trading in securities where any partner or employee is in possession of inside information about the securities unless it can rely on the Chinese wall exception in s1043H or one of the other exceptions or defences mentioned below.
|Consequences of Breach|
|•||Criminal offence punishable by:|
|•||in the case of an individual, 10 years’ jail and/or a fine equal to the greater of: (a) 4,500 penalty units; or (b) if the court can determine the total value of the benefits that have been obtained by one or more persons and are reasonably attributable to the commission of the offence, 3 times that total value; and|
|•||in the case of a body corporate, a fine equal to the greatest of: (a) 45,000 penalty units; or (b) if the court can determine the total value of the benefits that have been obtained by one or more persons and are reasonably attributable to the commission of the offence, 3 times that total value; or (c) if the court cannot determine the total value of those benefits, 10% of the body corporate’s annual turnover during the 12-month period ending at the end of the month in which the body corporate committed, or began committing, the offence (s1311).|
|•||Financial services civil penalty provision (s1317E) – civil penalty of $200,000 for individuals and $1,000,000 for corporations (s1317G(1A)) and compensation orders in favour of anyone suffering loss or damage (s1317HA).|
|•||in the case of an application, to the issuer of the financial product (s1043L(2));|
|•||in the case of an acquisition from or disposal to a person who did not possess the inside information, to the other party to the inside trade (s1043L(3) and (4)) AND to the issuer of the financial product acquired or disposed of (s1013(5)),|
|to pay the difference between the price at which the trade was done and the price at which it should have been done had the inside information been generally available - such an action may be brought against the insider, a person the insider procured to make the trade or anyone else "involved in the contravention" and all that has to be shown is that the insider knew the inside information was not generally available or was reckless in that regard.|
|•||Order to disclose information (s1324B).|
|•||Compensation orders (s1325).|
|•||Other remedial orders eg orders freezing voting rights and dividends or vesting Division 3 financial products in ASIC for sale (s1043O).|
|•||If person infringing is a licensed dealer or its representative – cancellation or suspension of licence (ss915C(1)(a) and 912A(1)(c)) or banning order (s920A(1)(e)) for breach of a financial services law.|
|•||If person infringing acquired information in his/her capacity as a director, executive officer or other employee of a corporation - liability for corporation/scheme civil penalties and compensation orders for improperly using information acquired in that capacity (ss183, 1317G(1), 1317H) plus liability at common law for breach of fiduciary duty to disgorge any profits made.|
|•||Automatic disqualification from being a director of or managing any corporation for 5 years (s206B).|
|•||Contract entered into in breach possibly voidable at option of innocent party (Singh v Crafter (1992) 10 ACLC 1365??).|
In early prosecutions, criminal penalties for insider trading tended to be fairly low: see, for example, R v Rivkin  NSWSC 447 and R v Doff  NSWSC 50. More recently, substantial criminal penalties have been imposed: see, for example, R v Xiao  NSWSC 240 (the former managing director of Chinese-based miner Hanlong Australia who made a personal profit of $1.7million by trading in securities in companies that would eventually become the subject of takeover offers by Hanlong Australia sentenced to 8 years 3 months jail for running an insider trading ring) and DPP (Cth) v Hill and Kamay  VSC 86 (a former NAB employee who made a profit of more than $7 million by trading in foreign exchange derivatives on the back of data leaked by an accomplice at the Australian Bureau of Statistics sentenced to 7 years and 3 months jail - his appeal against the sentence was rejected in Kamay v The Queen  VSCA 296).
ASIC celebrated its first successful civil penalty prosecutions for insider trading in 2005 - ASIC v Petsas  FCA 88.
On civil damages, under s1043L, the amount in question can be recovered from the insider, anyone the insider procured to trade or anyone else "involved in the contravention". This phrase is defined in s79 to mean any person who has (a) aided, abetted, counselled or procured the contravention; (b) induced, whether by threats or promises or otherwise, the contravention; (c) been in any way, by act or omission, directly or indirectly, knowingly concerned in, or party to, the contravention; or (d) conspired with others to effect the contravention. So if a body corporate breaches the insider trading rules, any officers or employees who were knowingly concerned in the contravention may also be liable to compensate the other party to the trade.
ASIC may bring an action under s1043L(2) or (5) on behalf of the corporation which issued the products that were insider traded if the corporation declines to do so and ASIC considers that to be in the public interest (s1043L(6)).
Note the possibility for double liability under s1043L(3/4) and (5). Under the former pre-FSR law this was precluded by s1015. That section does not appear in the post-FSR law.
The heading to s1043L is: "A specific situation in which a compensation order under section 1317HA may be made". S1043L(10) also provides that the right of action under s1043L is in addition to any right that any other person has under the civil penalty regime in s1317HA. These two factors together seem to imply that an action can be bought for other types of losses under s1317HA over and above the specific losses that can be claimed under s1043L. This was doubted in respect of the former (pre-FSR) law in Ampolex Ltd v Perpetual Trustee Company (Canberra) Ltd (No 2). In that case, Ampolex originally sued under the predecessors to both ss1043L(5) and 1317HA (ss1005 and 1013(5) respectively) but subsequently dropped the s1013(5) action. All of the parties to the trades in question were aware of the inside information and therefore they were not entitled to make a claim under s1013(3) or (4) (the predecessors to ss1043L(3) and (4)). That necessarily precluded any derivative claim that Ampolex might assert under s1013(5). The issue therefore arose whether Ampolex could have an independent claim for damages under s1005 even though it could not make out a claim under s1013(5). The court, while not expressing a concluded opinion, seemed to suggest quite strongly that it could not and that dropping the s1013(5) action would therefore prove fatal at the final hearing to Ampolex's claim for damages. The reasoning by which the court arrived at this conclusion is questionable and turned very much on the drafting of s1005 and the fact that it was prefaced with the words "subject to the following sections of this Division" (ie s1005 was expressed to be subject to s1013). Even if, as a matter of statutory construction, the decision was correct in relation to the former (pre-FSR) law, it is not clear that it can survive the legislative changes made by the FSR reforms. Having said all this, if a plaintiff can’t show the type of loss referred to in s1043L, the legal principles around causation and remoteness of damage are likely to present significant hurdles to a claim for any other form of loss under s1317HA succeeding.
An example of the fourth last bullet point - a Perth broker was banned from providing financial services for 5 years for communicating inside information to 6 clients about a possible takeover target and advising them to acquire shares in the target. His appeal against the ban was rejected by the Federal Court (Catena v ASIC (No 2)  FCA 865).
An example of the third last bullet point - a former CEO of a Queensland government-owned energy corporation was charged with dishonestly using his knowledge of its business dealings for personal gain (see ASIC Media Release 08-147). It was alleged that he applied for 60,000 shares in the float of Perth-based company when he was aware that the board of the energy corporation had resolved to enter into a material contract with a subsidiary of the floating company. The accused was eventually found not guilty (see ASIC Advisory 10-114AD).
In relation to the last bullet point, Singh v Crafter was 2/1 split decision of the Full Court of the WA Supreme Court holding that a contract entered into in breach of the insider trading prohibition was voidable for illegality, overturning a decision of the lower court on this point.
Note that there is also the potential for the profits of insider trading to be recovered under the Proceeds of Crime Act 2002 (Cth). As an example, in 2015, the former chairman of Gunns Limited was ordered to pay a $500,000 pecuniary penalty under POCA following his criminal conviction for insider trading in 2013. This was the sum agreed in a mediation as the amount of the benefit he derived from his insider trading (see ASIC Media Release 15-387).
Return to Outline
|CA s1043F – Corporate Chinese Walls Exception|
|A body corporate does not contravene s1043A(1) by entering into a transaction or agreement at any time merely because of information in the possession of an officer or employee of the body corporate if:|
|(a)||the decision to enter into the transaction or agreement was taken on its behalf by a person or persons other than that officer or employee;|
|(b)||it had in operation at that time arrangements that could reasonably be expected to ensure that the information was not communicated to the person or persons who made the decision and that no advice with respect to the transaction or agreement was given to that person or any of those persons by a person in possession of the information; and|
|(c)||the information was not so communicated and no such advice was so given.|
The origin of the term "Chinese wall" is unclear. According to the Webster online dictionary, the term was "popularized in the United States following the stock market crash of 1929, when the U.S. government legislated information separation between investment bankers and brokerage firms, in order to limit the conflict of interest between objective analysis of companies and the desire for successful initial public offerings. Rather than prohibiting one company from engaging in both businesses, the government permitted the implementation of Chinese wall procedures. The term originates from a reference to Chinese standing screens which allow for the temporary installation of a wall in a room lacking the permanent architectural feature."
However, according to Christopher M. Gorman, Are Chinese Walls the Best Solution to the Problems of Insider Trading and Conflicts of Interest in Broker-Dealers?, Chinese Walls first came into existence in 1968 as part of a settlement between the SEC and Merrill Lynch ((1968) 43 SEC 933). Merrill Lynch was the lead underwriter for a potential public offering of debentures by Douglas Aircraft Company and learned that the company was about to issue a revised estimate of its earnings with substantially lower figures. Merrill Lynch's underwriters gave this information to the sales department, who in turn told several mutual funds and other large institutional clients. During the three-day period before Douglas publicly disclosed this information, Merrill Lynch and its clients sold the stock to avoid substantial losses. As part of the settlement Merrill Lynch reached with the SEC, the firm adopted a Statement of Policy that prohibited disclosure by any member of the underwriting division of material information obtained from a corporation and not disclosed to the investing public, effectively establishing a Chinese Wall, as that term is understood today. After that settlement, other brokerage firms voluntarily implemented Chinese Walls to mitigate the risk of being targeting by the SEC in an insider trading investigation.
Most of our case law on Chinese walls relates to their use in law firms to isolate teams acting for different parties in litigation. The courts have shown themselves to be extremely reluctant to accept the efficacy of Chinese walls in that context – see, for example, Mallesons Stephen Jacques v KPMG Peat Marwick (1990) WAR 357 and Bolkiah v KPMG  2 AC 222.
|CA s1043G – Partnership Chinese Walls Exception|
|The members of a partnership do not contravene s1043A(1) by entering into a transaction or agreement at any time merely because one or more (but not all) of the members, or an employee or employees of the partnership, are in actual possession of information if:|
|(a)||the decision to enter into the transaction or agreement was taken on behalf of the partnership by any one or more of the following persons:|
|(i)||a member or members who are taken to have possessed the information merely because another member or other members, or an employee or employees of the partnership, were in possession of the information;|
|(ii)||an employee or employees of the partnership who was not or were not in possession of the information;|
|(b)||the partnership had in operation at that time arrangements that could reasonably be expected to ensure that the information was not communicated to the person or persons who made the decision and that no advice with respect to the transaction or agreement was given to that person or any of those persons by a person in possession of the information; and|
|(c)||the information was not so communicated and no such advice was so given.|
S1043G also provides that a member of a partnership does not contravene s1043A(1) by entering into a transaction or agreement otherwise than on behalf of the partnership merely because the member is taken to possess information that is in the possession of another member or an employee of the partnership. This would cover trading by a partner on his or her personal account.
|CA s1043K – Dealer’s Chinese Wall Exception|
|A person (the agent) does not contravene s1043A(1) by applying for, acquiring, or disposing of, or entering into an agreement to apply for, acquire, or dispose of, financial products that are able to be traded on a licensed market if:|
|(a)||the agent is a financial services licensee or a representative of a financial services licensee;|
|(b)||the agent entered into the transaction or agreement concerned on behalf of another person (the principal) under a specific instruction by the principal to enter into that transaction or agreement;|
|(c)||the licensee had in operation, at the time when that transaction or agreement was entered into, arrangements that could reasonably be expected to ensure that any information in the possession of the licensee, or of any representative of the licensee, as a result of which the person in possession of the information would be prohibited by s1043A(1) from entering into that transaction or agreement was not communicated to the agent and that no advice with respect to the transaction or agreement was given to the principal or to the agent by a person in possession of the information;|
|(d)||the information was not so communicated and no such advice was so given; and|
|(e)||the principal is not an associate of the licensee or of any representative of the licensee;|
|but nothing in this section affects the application of s1043A(1) in relation to the principal.|
"Associate" here takes its meaning from ss11, 13 and 15. In the case of a body corporate, its related bodies corporate and its and their directors and secretaries are "associates" and therefore trades done on their behalf by the body corporate fall outside the protection of this rule. Similarly, in the case of partnerships, their partners are associates and therefore trades done on their behalf by the partnership fall outside the protection of this rule.
But what are "arrangements that can reasonably be expected to ensure" that inside information is not passed on and advice is not given to those who should not have it. There is no guidance on this in the Corporations Act or ASIC Regulatory Guides and only limited guidance in Australian and UK case law.
|What are "Reasonable Arrangements"?|
|•||Chinese walls must be institutionalised and not transitory: see Bolkiah v KPMG  2 AC 222.|
|•||Reasonable arrangements don't require perfection: see ASIC v Citigroup Global Markets Australia Pty Limited (No. 4)  FCA 963.|
|•||It is submitted that the rules adopted and procedures endorsed by the ASX and other major exchanges are also of significant evidentiary value in determining what is "reasonable" for these purposes (see below).|
In Bolkiah v KPMG, the House of Lords had to consider whether, and if so in what circumstances, a firm of accountants which had provided litigation support services to a former client and in consequence had in its possession information which was confidential to him could undertake work for another client with an adverse interest. Delivering the judgment of the House, Lord Millet said:
"Chinese Walls are widely used by financial institutions in the City of London and elsewhere. They are the favoured technique for managing the conflicts of interest which arise when financial business is carried on by a conglomerate. The Core Conduct of Business Rules published by the Financial Services Authority recognise the effectiveness of Chinese Walls as a means of restricting the movement of information between different departments of the same organisation. They contemplate the existence of established organisational arrangements which preclude the passing of information in the possession of one part of the business to other parts of the business. In their Consultation Paper on Fiduciary Duties and Regulatory Rules the Law Commission (1992) (Law. Com. No. 124) describe Chinese Walls as normally involving some combination of the following organisational arrangements:
|(i)||the physical separation of the various departments in order to insulate them from each other - this often extends to such matters of detail as dining arrangements;|
|(ii)||an educational programme, normally recurring, to emphasis the importance of not improperly or inadvertently divulging confidential information;|
|(iii)||strict and carefully defined procedures for dealing with a situation where it is felt that the wall should be crossed and the maintaining of proper records where this occurs;|
| ||(iv)||monitoring by compliance officers of the effectiveness of the wall;|
disciplinary sanctions where there has been a breach of the wall.
KPMG insist that, like other large firms of accountants, they are accustomed to maintaining client confidentiality not just within the firm but also within a particular team. They stress that it is common for a large firm of accountants to provide a comprehensive range of professional services including audit, corporate finance advice, corporate tax advice and management consultancy to clients with competing commercial interests. Such firms are very experienced in the erection and operation of information barriers to protect the confidential information of each client, and staff are constantly instructed in the importance of respecting client confidentiality. This is, KPMG assert, part of the professional culture in which staff work and becomes second nature to them. Forensic projects are treated as exceptionally confidential and are usually given code names. In the present case KPMG engaged different people, different servers, and ensured that the work was done in a secure office in a different building. KPMG maintain that these arrangements satisfy the most stringent test, and that there is no risk that information obtained by KPMG in the course of Project Lucy has or will become available to anyone engaged on Project Gemma.
I am not persuaded that this is so. Even in the financial services industry, good practice requires there to be established institutional arrangements designed to prevent the flow of information between separate departments. Where effective arrangements are in place, they produce a modern equivalent of the circumstances which prevailed in Rakusen's case  1 Ch. 831. The Chinese Walls which feature in the present case, however, were established ad hoc and were erected within a single department. When the number of personnel involved is taken into account, together with the fact that the teams engaged on Project Lucy and Project Gemma each had a rotating membership, involving far more personnel than were working on the project at any one time, so that individuals may have joined from and returned to other projects, the difficulty of enforcing confidentiality or preventing the unwitting disclosure of information is very great. It is one thing, for example, to separate the insolvency, audit, taxation and forensic departments from one another and erect Chinese Walls between them. Such departments often work from different offices and there may be relatively little movement of personnel between them. But it is quite another to attempt to place an information barrier between members all of whom are drawn from the same department and have been accustomed to work with each other. I would expect this to be particularly difficult where the department concerned is engaged in the provision of litigation support services, and there is evidence to confirm this. Forensic accountancy is said to be an area in which new and unusual problems frequently arise and partners and managers are accustomed to share information and expertise. Furthermore, there is evidence that physical segregation is not necessarily adequate, especially where it is erected within a single department.
In my opinion an effective Chinese Wall needs to be an established part of the organisational structure of the firm, not created ad hoc and dependent on the acceptance of evidence sworn for the purpose by members of staff engaged on the relevant work."
In considering the second of the two allegations that Citigroup had insider traded in ASIC v Citigroup Global Markets Australia Pty Limited (No. 4), the court had to consider whether Citigroup's Chinese wall arrangements were reasonable enough to attract the defence in s1043F. Having previously found that they met the tests laid down in Bolkiah v KPMG (see para 449), the court said (at para 585-598):
"I referred ... above, when dealing with the adequacy of Citigroup’s arrangements for the management of conflicts of interest, to [the evidence of] Mr Monaci [Citigroup's compliance officer] ... as to Citigroup’s physical arrangements and its policies and procedures. I found, albeit with some reservations, that they were adequate to meet the obligations imposed by s912A(1)(aa) of the Corporations Act ...
Although ASIC did not cross-examine Mr Monaci as to the adequacy of the arrangements set out in his statement, it contended that there were two reasons why the Chinese walls defence must fail. The first was that Citigroup had no mechanism to bring a trader such as Mr Manchee [the proprietary trader who had purchased Toll shares] 'over the wall'. The second was that Citigroup had no effective arrangements to prevent the fourth conflict of interest, which was caused by its purchase of the Patrick shares, from arising.
In attacking the absence of any mechanism to bring Mr Manchee across the wall, Citigroup pointed to the ad hoc nature of what took place once the private side became aware of Mr Manchee's trading.
It is true, as ASIC submitted, that what took place was unscripted. Moreover, Mr Manchee remained isolated from the information only as a result of the oblique nature of the communications and, in particular, by [the circumspect behaviour of] Mr Darwell [Manchee's boss] ... in conveying his concerns in a way which did not suggest the existence of price sensitive information.
But it would be wrong to conclude that there were no arrangements in place to bring a trader such as Mr Manchee across the Chinese wall. Mr Monaci referred in his statement to Citigroup’s written policies which require private side employees not to communicate 'material non-public information' to persons on the public side without involving legal or compliance personnel to assess the materiality of the information and, when appropriate, to implement 'wall crossing' procedures. He also said that:
"Any private side person wishing to talk about non-public information with (or otherwise convey such information to) persons from the public side of the information barrier (Chinese wall) are required to pre-clear such communications with legal or Compliance."
Assuming [the statement of] Mr Sinclair [the Head of Equities, who had enquired of Darwell who was trading in Toll shares and indicated that it was potentially a problem] ... to Mr Darwell to be ‘material non-public information’, it would follow that Mr Sinclair’s initial communication with Mr Darwell was not in accordance with Citigroup's written procedures. This is because he obtained no prior clearance, as Mr Monaci implicitly recognised in saying "Wait, hang on, Paul [Darwell] is public side".
I do not consider that Mr Sinclair is to be criticised. But what the unscripted actions of Mr Sinclair and Mr Darwell show is the practical impossibility of ensuring that every conceivable risk is covered by written procedures and followed by employees.
However, the arrangements required to satisfy s 1043F(b) of the Corporations Act do not require a standard of absolute perfection. The test stated in the section is an objective one. It is, "arrangements that could reasonably be expected to ensure that the information was not communicated".
In my view, the arrangements referred to by Mr Monaci in his written statement were sufficient to meet the requirements of s1043F(b). They did not, in express terms, anticipate the situation which arose on 19 August 2005 but they laid down general procedures which could reasonably be expected to ensure that legal or compliance officers of Citigroup vetted any communication of potentially price sensitive information to prevent it crossing the Chinese wall.
ASIC submitted that a proper arrangement in the run up to the announcement of the bid would have been to bring proprietary traders such as Mr Manchee across the Chinese wall. It pointed out that those arrangements existed in relation to analysts.
However, I do not consider that there is any evidentiary support for the proposition that this step was required in order to put in place appropriate arrangements in relation to proprietary traders. I accept Mr Monaci's evidence that there are policy considerations which underlie the question of when to bring employees across the Chinese wall. This is because, to bring a trader such as Mr Manchee over the wall risks sending a signal to the market about confidential investment banking activities.
The findings which I have made also answer ASIC’s submission that Citigroup had no arrangements in place to prevent the fourth conflict of interest from arising.
What underlies both aspects of ASIC’s attack on the adequacy of Citigroup's Chinese walls is its contention that adequate arrangements for the management of conflicts of interest entailed the receipt of Toll’s informed consent to proprietary trading. But it would follow from this that Chinese walls could never amount to a defence in the absence of informed consent. Mr Walker [ASIC's counsel] conceded as much in his closing address.
To make such a finding would be contrary to the express recognition of the Chinese walls defence in s 1043F of the Corporations Act. I therefore reject the submission."
The statement above that "to bring a trader such as Mr Manchee over the wall risks sending a signal to the market about confidential investment banking activities" really doesn't sit all that comfortably with the finding that Citigroup had procedures in place to bring its research analysts over the wall. There is clearly a much greater risk of sending a signal to the market if an analyst who regularly covers a stock and who is likely to have frequent contact with institutional investors is precluded from writing research or giving advice on that stock because they have been taken over the wall, than there is with a proprietary trader. A proprietary trader functions primarily by interacting with a trading terminal and has no real need to have any contact with institutional investors (in fact, you could mount a reasonably compelling argument that proprietary traders should not have any contact whatsoever with institutional investors, given the insider trading and front running issues that might arise). The only real impact on a proprietary trader of taking them over the wall in relation to a particular stock should be to reduce by one the universe of stocks that they can trade in and, properly managed, the risk of sending a signal to the market should be miniscule.
|It also doesn't sit all that comfortably with the finding that Citigroup's Chinese walls complied with the tests laid down in Bolkiah v KPMG, given that one of those tests is that there are "strict and carefully defined procedures for dealing with a situation where it is felt that the wall should be crossed and the maintaining of proper records where this occurs".|
Return to Outline
|CA ss1043B - Exception for Redemption of Scheme Interests|
|S1043A(1) (insider trading) does not apply in respect of a member's withdrawal from a registered scheme if the amount paid to the member on withdrawal is calculated (so far as is reasonably practicable) by reference to the underlying value of the assets of the financial or business undertaking or scheme, common enterprise, investment contract or time-sharing scheme to which the member's interest relates, less any reasonable charge for acquiring the member's interest.|
Without this exception, the responsible entity of a registered managed investment scheme could be guilty of insider trading when it pays over the redemption amount owing to a withdrawing scheme member, if it possesses materially price sensitive information about the scheme that is not generally available at the time. Note that this only applies to the responsible entity of a registered scheme. There is no equivalent defence for responsible entities of unregistered schemes. Note also the restrictions on the withdrawal price. If the responsible entity were to charge an unreasonable amount for acquiring the member's interest or factor in anything unrelated to the underlying value of the assets of the scheme, the exception would not be available. It is submitted that the drafting of this exception is unduly restrictive.
|CA s1043C – Underwriting Exceptions|
|S1043A(1) (insider trading) does not apply in respect of:|
|(a)||applying for or acquiring securities or managed investment products under an underwriting agreement or a sub-underwriting agreement;|
|(b)||entering into an agreement referred to in (a); or|
|(c)||disposing of securities or managed investment products acquired under an agreement referred to in (a).|
|•||S1043A(2) (tipping) does not apply in respect of:|
|(a)||the communication of information in relation to securities or managed investment products to a person solely for the purpose of procuring the person to enter into an underwriting agreement in relation to any such securities or managed investment products; or|
|(b)||the communication of information in relation to securities or managed investment products by a person who may be required under an underwriting agreement to apply for or acquire any such securities or managed investment products if the communication is made to another person solely for the purpose of procuring the other person to do either or both of the following:|
|(i)||enter into a sub-underwriting agreement in relation to any such securities or managed investment products;|
|(ii)||apply for any such securities or managed investment products.|
Note that the definition of "managed investment product" in CA ss9 and 761A effectively limits this exception to registered managed investment schemes. There is no equivalent exception for unregistered schemes.
|CA ss1043D and 1043E - Exception for Legally Required Acts|
|•||S1043A(1) (insider trading) does not apply in respect of the acquisition of financial products pursuant to a requirement imposed by the Corporations Act (s1043D).|
|•||S1043A(2) (tipping) does not apply in respect of the communication of information pursuant to a requirement imposed by the Commonwealth, a State, a Territory or any regulatory authority (s1043E).|
An example of an acquisition pursuant to a requirement imposed by the Corporations Act would be a compulsory buy-out following a takeover under Chapter 6A. An example of a communication pursuant to a legal requirement would be an announcement by an issuer to the ASX under the continuous disclosure regime in Chapter 6CA (see below).
|CA s1043H - Own Intentions Defence for Individuals|
|A natural person does not contravene s1043A(1) (insider trading) by entering into a transaction or agreement in relation to financial products issued by another person merely because the person is aware that he or she proposes to enter into, or has previously entered into or proposed to enter into, one or more transactions or agreements in relation to financial products issued by the other person or by a third person.|
The "own intentions" exceptions in this section and in ss1043I and 1043J below are intended to operate so that a person who has, for example, decided to make a takeover offer for a company (which in almost all cases would be materially price-sensitive, and therefore "inside", information while it was not generally known) is not precluded from buying a pre-bid stake in the target because they have knowledge of their own intentions in this regard.
|CA s1043I - Own Intentions Defence for Bodies Corporate|
|A body corporate does not contravene s1043A(1) (insider trading) by entering into a transaction or agreement in relation to financial products issued by another person merely because:|
|•||the body corporate is aware that it proposes to enter into, or has previously entered into or proposed to enter into, one or more transactions or agreements in relation to financial products issued by the other person or by a third person; or|
|•||an officer or employee of the body corporate is aware that the body corporate proposes to enter into, or has previously entered into or proposed to enter into, one or more transactions or agreements in relation to financial products issued by the other person or by a third person PROVIDED the officer or employee became aware of those matters in the course of the performance of duties as such an officer or employee.|
Note that this section only applies to dealings by the body corporate with the relevant intention. It will not apply to protect dealings by, say, a related body corporate or associate.
|CA s1043J - Own Intentions Defence for Officers or Agents of Bodies Corporate|
|A person (the first person) does not contravene s1043A(1) (insider trading) by entering into a transaction or agreement on behalf of a person (the second person) in relation to financial products issued by another person (the third person) merely because the first person is aware that the second person proposes to enter into, or has previously entered into or proposed to enter into, one or more transactions or agreements in relation to financial products issued by the third person or by a fourth person PROVIDED the first person became aware of those matters in the course of the performance of duties as an officer or employee of the second person or in the course of acting as an agent of the second person.|
The heading to s1043J is possibly misleading – it speaks of officers and agents of a body corporate but the section itself can clearly apply to an agent acting on behalf of a natural person.
Note again that this section only applies to dealings by an agent for the principal with the relevant intention. It will not apply to protect dealings by an agent for, say, a related body corporate or associate of the principal.
|CR r9.12.01 – Other Exemptions|
|S1043A(1) (insider trading) does not have effect in relation to the following:|
|(a)||the obtaining by a director of a share qualification;|
|(b)||the application for, and acquisition under that application of, financial products of a body corporate by, or by a trustee for, employees of that body, or of a body corporate that is related to the first-mentioned body under a superannuation scheme, pension fund or other scheme established solely or primarily for the benefit of the employees;|
|(c)||a transaction entered into by a person in accordance with his or her obligations under an underwriting agreement;|
|(d)||a person holding the office of:|
|(i)||personal representative of a deceased person;|
|(iii)||trustee under Parts IV, X and XI of the Bankruptcy Act 1966;|
|in respect of a transaction entered into by the person in good faith in the performance of the functions of the office; or|
|(e)||a sale of financial products under:|
|(i)||a mortgage or charge of the financial products; or|
|(ii)||a mortgage, charge, pledge or lien of documents of title to the financial products.|
|CA s1043M – Defences to Criminal Prosecutions|
|•||Onus is on the accused to prove the facts or circumstances giving rise to an exception under ss1043B - 1043K (s1043M(1)).|
|•||In addition to the exceptions, it is a defence to a prosecution if the accused proves:|
|•||the information came into the possession of the insider/tipper solely as a result of the information having been made known as mentioned in s1042C(b)(i), ie, as part of it being broadly disseminated to the market (ss1043M(2)(a) and (3)(a)); or|
|•||the other party to the transaction, agreement or communication knew, or ought reasonably to have known, of the information beforehand (ss1043M(2)(b) and (3)(b)).|
The first bullet point means that a body corporate seeking to rely on, say, the Chinese wall defence has to be able to prove, on balance of probabilities, that its arrangements could reasonably be expected to ensure that any inside information about Division 3 financial products in the possession of an insider was not communicated to the relevant employees who effected the dealing in those products and that no advice with respect to the dealing was given to those employees by the insider.
The first indented bullet point is the so-called "diligent investor" defence. It is there to protect a person who trades having obtained inside information as part of the process of it being released to the market but before it becomes "generally available" within the meaning of s1042C. Note that technically this defence does not apply to the first person in the chain who starts the process of releasing the information to the market. In the case of an issuer announcing information to the ASX, its actions ought to be covered by s1043E – information required to be disclosed under a legal requirement (the continuous disclosure rules) - although to rely on that exception the information would have to be announced to the ASX before, or at least simultaneously with, its dissemination in any other way (eg through a press conference or press release).
Query how this defence operates in relation to the dissemination of research reports. From a policy standpoint, an analyst should be able to disseminate research reports in order to promote an informed market. It is submitted that if this issue ever comes before a court, it ought to find that general dissemination to investors of a research report containing hitherto inside information does not involve a breach of the tipping provisions even though some of those investors might be expected to trade on the basis of the report. It could do this either by taking the person who gave the analyst the information as step 1 in the chain so that the analyst can qualify as a person receiving information under the "diligent investor" defence or by taking a purposive approach to the tipping provision and reading it down (as the courts have done with a number of other insider trading provisions). Of course, this should only happen where the information is "made known as mentioned in s1042C(b)(i)" - ie the research report is broadly disseminated to market participants. It should not happen if the report receives only limited dissemination or some investors are given preferential disclosure.
Note that in relation to the second indented bullet point (the so-called "insider-to-insider" defence), there is no equivalent express defence to civil liability under s1043L. However, s1043L predicates the right of a plaintiff who has sold products to, or purchased products from, an insider on the plaintiff not actually knowing the inside information at the time of the sale/purchase. If the person does not know, but ought reasonably to have known, the information, then the court has a discretion to relieve the insider from civil liability under s1043N (see next slide).
One might be tempted to argue that the courts ought to interpret s1043M(2)(b) as meaning that where that defence is made out, s1043A has not been contravened and so it also provides a defence to civil recovery under s1043L (one of the conditions to recovery under that section is a contravention of s1043A – see s1043L(1)(c)). Ampolex Ltd v Perpetual Trustee Company (Canberra) Ltd (No 2), discussed earlier, held differently however. There the defendants argued that the plaintiff's claim should be summarily dismissed because all parties to the trade were aware of the information and the precursor to s1043M(2)(b) was a complete defence to both a criminal claim and a civil action for damages. The court disagreed, saying that this section only applied to a criminal prosecution and that the precursor to s1043L set out its own defences to a civil claim. (See also the dissenting judgment in Singh v Crafter, discussed later). This finding is also supported by the language used in s1043M(1) – exceptions are not a contravention and also constitute a defence – whereas s1043M(2) only constitutes a defence.
|CA s1043N – Relief from Civil Liability|
|In proceedings against a person under Part 9.4B (including under section 1317HA) relating to a contravention of ss1043A(1) or (2), the court may relieve the person wholly or partly from liability if it appears to the court that:|
|(a)||in any case - the circumstances in any of the sections referred to in s1043M(1) applied;|
|(b)||in the case of s1043A(1) - the circumstance referred to in s1043M(2)(a) or (b) applied; or|
|(c)||in the case of s1043A(2) - the circumstance referred to in s1043M(3)(a) or (b) applied.|
For (a) above, the sections referred to in s1043M(1) are the exceptions to insider trading in ss1043B - 1043K. This doesn't make a lot of sense because, if one of those sections applies, there is no contravention of 1043A for the court to grant relief from.
For (b) above, the circumstance referred to in s1043M(2)(a) or (b) are that the information came into the possession of the insider solely as a result of the information having been made known as mentioned in s1042C(b)(i) (ie, as part of it being broadly disseminated to the market) OR the other party to the transaction or agreement knew, or ought reasonably to have known, of the information beforehand.
For (c) above, the circumstance referred to in s1043M(3)(a) or (b) are that the information came into the possession of a tippee solely as a result of the information having been made known as mentioned in s1042C(b)(i) (ie, as part of it being broadly disseminated to the market) OR the other party to the communication knew, or ought reasonably to have known, of the information beforehand.
There is also provision in s1317S for the court to relieve a person either wholly or partly from a liability to which the person would otherwise be subject for contravening a civil penalty provision if it appears that they have acted honestly and, having regard to all the circumstances of the case, they ought fairly to be excused for the contravention.
|CA s1043L(7) – Relief From s1043L Liability|
|In an action brought against a person under s1043L because the person entered into, or procured another person to enter into, a transaction or agreement at a time when certain information was in the first-mentioned person's possession, the court may relieve the person wholly or partly from liability if it appears to the court that the information came into the first-mentioned person's possession solely as a result of the information having been made known as mentioned in s1042C(1)(b)(i).|
Under the former law, this used to be a complete defence to a civil liability claim. It is now only a factor allowing the court to grant relief in its discretion. It is unclear how this section relates, and what this adds, to s1043N. S1043L makes it clear that it is a sub-species of a s1317(HA) action and so s1043N, allowing the court generally to grant relief from s1317(HA), would seem to cover the point.
Return to Outline
|ASX MIR 3.6.2 - Prohibition of Advice to Client|
|Where as a result of its relationship to a client, a market participant is in possession of information that is not generally available in relation to a financial product and which would be likely to materially affect the price of that financial product if the information was generally available, that market participant must not give any advice to any other client of a nature that would damage the interest of either of those clients.|
A breach of ASX MIR 3.6.2 attracts a potential penalty of $1,000,000.
ASX MIR 3.6.1 defines "client" to include a shareholder in a company which constitutes the market participant.
ASX MIR 3.6.4 provides that, for the purposes of MIR 3.6.2, a market participant or an employee or partner of a market participant advising a client that the market participant is precluded from giving the client advice will not be regarded as giving advice.
Note that this rule only applies to information in the possession of a market participant as a result of its relationship to a client. This does not sit that comfortably with the usual corporate group structure where, for regulatory capital reasons, the broker typically is in a separate legal entity to other parts of the organisation, such as the investment bank. Often, inside information is learnt not because of a relationship between the market participant and the client, but because of a relationship between some other part of the organisation, such as the investment bank, and the client.
|ASX MIR 3.6.3 – Chinese Walls in Place|
|For the purposes of MIR 3.6.2, a market participant is not regarded as having possession of information that is not generally available in relation to a financial product where:|
|(a)||that market participant has in place arrangements whereby information known to persons included in one part of the business of the market participant is not available, directly or indirectly, to those involved in another part of the business of the market participant;|
|(b)||it is accepted that in each of the parts of the business of the market participant so divided, decisions will be taken without reference to any interest which any other such part or any person in any other such part of the business of the market participant may have in the matter; and|
|(c)||the person advising the client is not in possession of that information.|
Again this definition, in referring to "parts of the business of the market participant", does not sit that comfortably with the usual corporate group structure where the broker typically is in a separate legal entity to other parts of the organisation, such as the investment bank.
|ASX Market Rules Guidance Note 13|
|Chinese walls must exhibit the following features:|
|•||The market participant must have a written policy statement, distributed to all staff, forbidding communication of non-public information to members of staff who offer financial products advice or trade financial products. Communication of non-public information across Chinese walls is to be strictly prohibited. Communication of general market information is not required to be restricted.|
|•||All members of staff are to acknowledge in writing that they have read, understood and have agreed to comply with the market participant's written policy statement. These are to be renewed annually. The market participant is to retain these acknowledgments.|
|•||New members of staff are to be informed of their obligations with respect to insider trading and the market participant’s Chinese walls policies and procedures and to complete a personal acknowledgment immediately on commencement of employment.|
|•||Partners/directors are to acknowledge in writing that they agree to be denied information regarding the market participant’s business activities where the communication of that information would be in breach of its Chinese walls procedures.|
|•||Access to documents (including electronic records and computer files) which may contain non-public information is to be restricted and the restriction monitored by a nominated officer(s) of the market participant. The nominated officer is to be referred to in the written policy statement.|
|•||The departments or work units on opposite sides of the Chinese walls are to have separate management supervision on a day to day basis.|
|•||Departments or areas likely to be in possession of non-public financial products information are to be physically separated and secured from financial products advisory and trading departments or areas.|
|•||Frequent transfers of personnel between corporate and other like departments and dealing/advising departments are to be avoided.|
|•||No member of staff who is in a position of knowing non-public information may participate in any investment committees or similar bodies or engage in activities involving the giving of financial products advice, including research reports and funds management.|
|•||Members of staff must receive periodic (at least annual) training and education in relation to insider trading and other commonly encountered conflicts of interest.|
|•||The effectiveness of the written policy statement is to be subject to periodic (at least annual) internal reviews and, where warranted, external auditing.|
|•||Where Chinese walls are breached, the market participant must immediately initiate steps to ensure that members of staff who are in a position to use the non-public information are immediately prohibited from advising on or initiating dealings in any financial products whose market price is likely to be affected by the disclosure of that information.|
The predecessor to ASX MIR 3.6 (ASX Market Rule 7.18) required Chinese walls to accord with the guidelines prescribed by the ASX. ASX Market Rules Guidance Note 13 set out the procedures prescribed by the ASX for the establishment of Chinese walls for the purposes of that Market Rule.
ASIC has said that it will seek to follow the published interpretations contained in pre-existing ASX Market Rules guidance notes, including Guidance Note 13, but will look to review them and issue replacement ASIC Guidance Notes in due course (see ASIC Regulatory Guide 214 - Guidance on ASIC market integrity rules for ASX and ASX 24 markets, at para 57-58).
To be consistent with global best practice, Guidance Note 13 should have imposed requirements for the maintenance of restricted and watch lists and for the monitoring of employee trades (compare the position in the US mentioned below).
|ASIC/ASX Trading Best – Additional Best Practice Guidance|
|In addition, for proper Chinese walls, a market participant should have:|
|•||Policies and procedures dealing with the creation and enforcement of embargoed/restricted stock lists covering, amongst other things, when stocks that are the subject of changed research recommendations are added to those lists.|
|•||Staff trading rules covering shares, derivatives (including warrants), futures and treasury products that:|
|•||prohibit personal account trades in stocks that have been embargoed/restricted; and|
|•||contain minimum holding periods for stocks bought and derivatives positions opened by staff members.|
|•||Periodic reviews of employees and their related parties personal account transactions to ensure that there are no trades in breach of the Chinese walls policy.|
"Trading Best" was a joint ASX and ASIC awareness and self-assessment program conducted in 2001. The Trading Best self-assessment questionnaire was structured to highlight areas where the ASX and ASIC thought that compliance policies and procedures were required. In addition to the requirements outlined in then ASX Business Rules Guidance Note 7/97 (the precursor to Market Rule Guidance Note 13), the ASX and ASIC identified these additional "best practice" requirements that they said market participants should comply with. Given that statement, it is somewhat surprising that, when ASX Business Rules Guidance Note 7/97 was re-issued in March 2004 as ASX Market Rules Guidance Note 13, the ASX did not take the opportunity to include these additional "best practice" requirements.
|ASX MIR 5.11.1(1) - Obligation to Report Suspected Insider Trading to ASIC|
|If a market participant has reasonable grounds to suspect that:|
|(a)||a person ("the insider") has placed an order into or entered into a transaction on the market in relation to a financial product while in possession of inside information (within the meaning of CA s1042A), whether or not the market participant is aware of:|
|(i)||the identity of the insider; or|
|(ii)||all of the details of the order or transaction; or|
|the market participant must, as soon as practicable, notify ASIC in writing of the details of the transaction or order (to the extent known to the market participant) and the reasons it suspects the matter set out in (a) ...|
For guidance on this obligation, see ASIC Regulatory Guide 238 - Suspicious activity reporting.
There is an equivalent requirement in the Chi-X MIR for participants in that market.
ASX MIR 5.11.1(2) provides that a market participant is not required to notify ASIC under ASX MIR 5.11.1(1) if it has reported the relevant information to Austrac under AMLCTFA s41 or FTRA s16 (see lecture 7).
A breach of ASX MIR 5.11.1 attracts a potential penalty of $20,000.
Return to Outline
|Insider Trading and Securities Fraud Enforcement Act 1988|
|Amended the Securities Exchange Act 1934 and Investment Companies Act 1940 to require firms to "establish, maintain, and enforce written policies and procedures reasonably designed, taking into consideration the nature of the firm’s business, to prevent the misuse in violation of this title, or the rules or regulations thereunder, of material, non-public information by the firm or any person associated with the firm".|
|SEC Report: Broker-Dealer Policies on Chinese Walls 1990|
|Areas identified as needing improvement across the broker-dealer industry:|
|•||Maintenance of watch lists and restricted lists;|
|•||Concomitant review of employee and proprietary trading;|
|•||Structured and memorialized procedures;|
|•||Documentation of efforts taken to enforce Chinese walls;|
|•||Embargo of risk arbitrage activities in stocks about which the firm has inside information.|
This refers to the SEC Report entitled "Broker-Dealer Policies and Procedures Designed to Segment the Flow and Prevent the Misuse of Material Non-public Information"  Fed Sec Law Reports ¶84,520. A copy is included in your reading materials for the course.
A 'watch list' (or 'grey list') is a confidential list of stocks about which the firm has inside information that is used by the Compliance department to monitor the firm's and employees' trading activities for any suspicious trading in those securities. It is not distributed to staff outside the Compliance department and does not trigger any trading restrictions or prohibitions, since that would risk signalling to staff that the firm is in possession of inside information and potentially compromise the Chinese Wall. Typically, securities will be added to the watch list when the firm is asked to advise on a confidential market moving transaction, such as a takeover or a securities issue.
A 'restricted list' (or 'embargo list' or 'black list') is a list of securities in which trading is prohibited or restricted. Firms often maintain a firm-wide restricted list, which may be periodically published to relevant staff. Securities are typically placed on the restricted list when it is publicly announced that the firm is handling a significant transaction involving those securities, to ensure that staff and proprietary traders do not trade in those securities in a way that could be embarrassing to the firm. Typically, the research department will also be prohibited from publishing research about securities on the firm-wide restricted list for the same reason. Some firms also place securities on the firm-wide restricted list when it is known that the firm is about to issue a major piece of research on the securities, perhaps involving a change in investment rating, again so as to avoid staff or proprietary traders trading in those securities in a way that could be embarrassing to the firm (other firms deal with this issue by having a separate restricted or embargo list for the research department and prohibiting staff in that department from trading in stocks on that list - see next paragraph).
Individual departments at a firm may also have their own restricted or embargo lists. For example, the corporate advisory or equities underwriting department will typically have a confidential list of securities on which the department may have price sensitive information and will prohibit staff in the department from trading in those securities. Staff outside that department won't be prohibited from trading in those securities as that would risk signalling the price sensitive information to them and potentially compromise the Chinese wall. Instead the trading activities of staff outside the department will be monitored by Compliance against the watch list, looking for any potential leakage of information from the department concerned to other departments.
Some firms also maintain a 'rumour list' - a list of securities that are the subject of announcements or rumours about a pending transaction - and monitor staff and proprietary trading against that list to see if there was any unusual trading activity in the lead up to the announcement or rumour becoming generally known.
|NYSE/NASD Info Memo 91-22|
|The minimum requirements for proper Chinese walls are:|
|•||Memorialization of the firm's Chinese wall procedures and documentation of actions taken thereunder – especially its analyses and investigations of employee and proprietary trading;|
|•||Review of employee and proprietary trading – including maintenance of watch lists and restricted lists and controls over use by employees of outside brokers for dealings on personal account;|
|•||Supervision of inter-departmental communications – including use of Wall crossing forms;|
|•||Education and training of employees – including periodic written acknowledgements of Chinese walls procedures.|
Click here for a copy of NYSE/NASD Info Memo 91-22 (1991 NYSE Info. Memo LEXIS 40). This Info Memo was created to give guidance to brokers on the procedures to be implemented to comply with s3(b) of the Insider Trading and Securities Fraud Enforcement Act 1988.
|NYSE Disciplinary Proceedings 98-069|
|Barings criticised for failing to:|
|•||maintain a watch list as well as a restricted list;|
|•||include on its restricted list securities which are the subject of firm-related research;|
|•||review and supervise trader positions in non-market-maker securities that are opposite the firm's disseminated recommendations and executions of customer orders against these proprietary positions;|
|•||review and supervise employees trading in their personal accounts in securities in which the firm makes a market;|
|•||restrict employees from trading in their personal accounts before or after the issuance of a research report containing a change in recommendation;|
|•||obtain from employees signed certifications acknowledging their review and understanding of the firm's Chinese wall procedures; and|
|•||learn of the existence of employee accounts maintained outside the firm and obtain relevant statements and/or other records regarding trading in those accounts.|
This involved disciplinary proceedings by the NYSE against Barings in relation to an employee who had executed an order on his personal account against the firm’s proprietary trading account, jumping an unexecuted client order and receiving a more favourable price. Action was taken against Barings for failing to reasonably supervise or control employees. Adverse findings against Barings included that it failed to do the things mentioned above. A transcript of the disciplinary proceedings is available on the NYSE web site at: https://www.nyse.com/publicdocs/nyse/markets/nyse/disciplinary-actions/1998/98-069.pdf.
Return to Outline
|Front Running Defined|
|•||Front-running = knowingly trading ahead of a potentially market moving order, or the release of potentially market moving research, with a view to profiting from the market movement.|
|•||Could be an employee trading on their (or an associate's) personal account, on the firm's proprietary account or for a favoured client's account.|
For classic cases of front running, see ASIC Advisories 10-199AD and 10-258AD. In the former case, a portfolio manager and associate director of Macquarie Investment Management Ltd (MIML) pleaded guilty to 12 counts of insider trading. He had acquired securities in a number of Singapore listed companies and associated contracts for difference (CFDs) while possessing information that MIML intended to acquire large volumes of the same securities and in the knowledge that MIML's acquisitions would be likely to cause the price of the securities and the value of the CFDs to increase. Shortly after acquiring the securities and CFDs he disposed of them for substantial profits, often selling the securities directly to MIML. He was ultimately jailed for 9 months. In the latter case, an equities dealer employed by Orion Asset Management Ltd pleaded guilty to 19 counts of insider trading and 6 counts of communicating inside information about Orion’s trading intentions to an alleged associate. He also had profited by trading in CFDs while in possession of information about Orion’s trading intentions. He was ultimately sentenced to 4½ years jail and the $1.57 million in illicit profits he made from his illegal trading was subject to a forfeiture order under the Proceeds of Crime Act 2002.
ASIC Regulatory Guide 79 - Research report providers: Improving the quality of investment research addresses the issue of front running research. RG 79 makes the point that not only may research reports sometimes contain inside information, information about the research report may itself amount to inside information. This might arise, for example, because the analysis in the report is based on inside information and reveals a different financial picture of the subject company than was previously understood by the market. It might also arise where the analyst is proposing to change his or her investment rating of the relevant security, particularly if the analyst is well regarded and the market is likely to react to the change in rating. If a research report contains or amounts to inside information, someone who is aware of the report and who trades before or shortly after the publication of the report (ie before the market has had a reasonable opportunity to assimilate the information in the report) could be guilty of insider trading in breach of CA s1043A(1). The firm could also run into difficulties in trading for clients or on its own account over that period, unless it is able to rely on a Chinese wall defence.
To manage this risk, ASIC suggests that a research report provider should consider: (a) imposing a 'quiet period' on itself and/or its research staff before and after the distribution of research on a particular security in which trading in that security, or any derivative of that security, is restricted; and/or (b) adopting robust information barriers between the trading area and the research area to ensure that trading staff are not aware of pending research.
ASIC also suggests that research report providers should take reasonable steps to ensure that their research staff do not circumvent any trading restrictions by encouraging or arranging for others (eg the staff member’s family or other associated persons) to deal during the quiet periods. To do this effectively, of course, requires that the trading activities of research staff and their family members and associates are monitored.
One important issue that is not really addressed in RG 79 is the selective distribution of research. Occasionally, you will come across a situation where a research analyst wants to distribute copies of research to certain favoured clients (usually large wholesale clients) in advance of it being distributed more widely. This is usually done to curry favour with those clients and to give them an opportunity to trade on the research ahead of other clients. If the research does happen to have inside information, selective distribution of the research can breach the tipping prohibition in CA s1043A(2). This type of conduct also raises particular issues as to whether it is consistent with the licensee's duty to act "efficiently, honestly and fairly" (CA s912A(1)(a)).
Closely related to front running is the practice of "scalping" - ie purchasing a security for one's own account shortly before recommending it for purchase by others (for example, in a research report), with the intention of creating increased demand for the security and then selling out at a profit after the market rises in response. This won't necessarily amount to insider trading, unless the information about the recommendation itself is non-public and price sensitive, but it can amount to a failure to act "efficiently, honestly and fairly" and, depending on the circumstances, a breach of fiduciary duty and/or misleading and deceptive conduct. For an example, see SEC media release 2006-128.
|•||Potentially insider trading if information about the impending order or research is not generally available and materially price-sensitive.|
|•||Potentially a breach of client order precedence rules.|
|•||A failure to act "efficiently, honestly and fairly".|
|•||A breach of CA s183 (improperly using information acquired as an officer or employee of a corporation).|
|•||If front running a client order, a breach of fiduciary duty to the client (using confidential knowledge acquired from the fiduciary relationship for personal gain).|
|•||If front running a firm order or research, a breach of fiduciary duty to your employer (using confidential knowledge acquired in the course of employment for personal gain).|
A failure to act "efficiently, honestly and fairly" by a licensee may result in the cancellation or suspension of its financial services licence (ss915C(1)(a) and 912A(1)(a)) or by a representative of a licensee may result in a banning order against the representative (s920A(1)(b) and (e)). Breach of s183 gives rise to a liability for corporation/scheme civil penalties and compensation orders for improperly using information acquired in that capacity (ss1317G(1) and 1317H). Breach of fiduciary duty may result in the front runner being liable to disgorge any profits made from the breach to their principal (ie their client/employer).
|ASX MIR 5.8.4 – Dual Trading|
|A market participant must ensure that arrangements are in place to ensure that a representative responsible for placing orders for the market participant’s own account does not have access to orders submitted by clients of the market participant before the client orders are transmitted for execution.|
Note that this rule only applies to futures market transactions on the ASX market (ASX MIR 5.8.1) and not to cash market transactions or options market transactions - that is to say, you need a Chinese Wall between house traders and client traders designed to prevent front running, but only for futures traded on the ASX. A case can be made that this rule should be extended to apply also to cash market transactions (ie shares, debentures and warrants) and exchange traded options - see the question posed on the final slide below.
A breach of ASX MIR 5.8.4 attracts a potential penalty of $100,000.
Apart from ASX MIR 5.8.4, the only references that I can find to front running in the ASX Market Integrity Rules is a tangential reference in MIR 5.1.4(e) to a market participant acting in accordance with its "procedures to ensure that a person initiating, transmitting or executing an order who is aware of instructions of a client ... to deal in the relevant products ... does not use that information to the disadvantage of that client" as being a relevant factor in determining whether allocations are fair and reasonable.
|ASX 24 MIR 3.1.15 – Dual Trading|
|(1)||A market participant’s representative must not initiate a trade for any market participant’s house account in a contract, where that representative is holding or is likely to hold the market participant’s client orders to trade, or for any reason is likely to have knowledge or information of the market participant’s client orders to trade, in the same or similar commodity unless permitted under MIR 3.1.15(3).|
|(2)||A market participant must ensure that employees initiating trading for client orders cannot initiate trades for the market participant’s house account and that an employee who initiates trades for the market participant’s house account will not be privy to information concerning client orders.|
A breach of ASX 24 MIR 3.1.15 attracts a potential penalty of $1,000,000.
ASX 24 MIR 3.1.15(3) provides that a market participant which executes a trade to cover an error trade is not in breach of MIR 3.1.15(1).
For these purposes, "client" includes a related body corporate of the market participant or a division of the market participant which is separate from the market participant’s futures division (MIR 3.1.15(4)(a)) and "house account" means an account operated by a market participant for principal dealing only (this excludes dealings by the market participant on behalf of a corporation related to the market participant or another division within that market participant’s corporation which is separate from its futures division (MIR 3.1.15(4)(b)).
|ASX 24 MIR 3.1.14 – Personal Account Trading|
|(1)||A person must not initiate a trade on any market in any contract for that person’s account where that person has or is likely to have knowledge or information about any client orders of any market participant to trade, or instructions to trade, in the same or similar commodity.|
|(2)||For the purpose of MIR 3.1.14, a person has traded for that person’s account if that person trades for any entity, person or account:|
|(a)||in which that person has a beneficial interest, including a market participant’s house account in which the person has a financial interest;|
|(b)||in which that person might by exercise of some discretion have a beneficial interest, including a market participant’s house account in which the person has, or may have, a financial interest;|
|(c)||over which that person exercises any control (other than an account of the market participant of which the person is a director, partner or employee where such control is exercised in that capacity);|
|(d)||which is a corporation in whose shares that person has a "relevant interest" as that term is defined by the Corporations Act; or|
|(e)||which is that person’s relative or a relative’s account in which that person has a financial interest.|
A breach of ASX 24 MIR 3.1.14 attracts a potential penalty of $100,000.
For these purposes, "client" includes a related body corporate of the market participant or a division of the market participant which is separate from the market participant’s futures division; "a person having a financial interest in an account" includes any benefit which that person may enjoy as the result of the operation of that account or trading under that account; and "relative" includes spouse, parent, son, daughter, brother, sister, grandparent, grandchild, aunt or uncle (MIR 3.1.14(3)).
Note that the provisions in (2)(d) above are ridiculously wide. Applied literally, they would mean that if an employee happened to own a few shares in BHP Billiton and they did a trade for BHP Billiton, that trade would be considered a personal account trade for the purposes of this rule.
Return to Outline
|CA s674(2) – Listed Disclosing Entities Subject to Continuous Disclosure Rules|
|(a)||a listed entity has information about specified events or matters that the provisions of the listing rules of a listing market applying to that entity require the entity to notify to the market operator as they arise for the purpose of the operator making that information available to participants in the market; and|
|(b)||that information is not generally available and is information that a reasonable person would expect, if it were generally available, to have a material effect on the price or value of ED securities of the entity;|
|the entity must notify the market operator of that information in accordance with those provisions.|
"ED securities" is defined in CA s111AD. For a listed entity, it includes any class of securities to which the market’s listing rules apply (see s111AE).
CA s674(2A) makes it a civil penalty for a person to be involved in a listed disclosing entity's contravention of s674(2). There is a defence in CA S674(2B) if the person proves that they: (a) took all steps (if any) that were reasonable in the circumstances to ensure that the listed disclosing entity complied with its obligations under s674(2); and (b) after doing so, believed on reasonable grounds that the listed disclosing entity was complying with its obligations under that section.
CA s676 defines when information is generally available in similar terms to s1042C (see above).
CA s677 defines "material effect on price or value of securities" in similar terms to s1042D (see above), with the exception that it does not include the parenthetical qualification "(but only if)" that appears in s1042D. This led the WA Court of Appeal to conclude in Jubilee Mines NL v Riley  WASCA 62, that it is possible to show that information might have a material effect on the price or value of securities without necessarily relying on the test in s677. Martin CJ (Le Miere AJA agreeing) said:
"... [the predecessor to s677] does not provide that it is only information which has the defined characteristic that can fall within the scope of [the predecessor of s674(2)]. If the legislature had intended that result, the word 'if' in s[s677] would no doubt have been followed by the words 'and only if'. It follows that information can fall within the scope of the legislative regime either if it has the characteristic referred to in [s677] or alternatively, if it is for some other reason information which a reasonable person would be taken to expect to have a material effect on the price or value of securities.
However, in practical terms, it is very difficult to envisage a circumstance in which a reasonable person would expect information to have a material effect on the price or value of securities if the information would not be likely to influence persons who commonly invest in those securities in deciding whether or not to subscribe for, or buy or sell them. The price of securities quoted on a stock exchange is essentially a function of the interplay of the forces of supply and demand. It is therefore difficult to see how a reasonable person could expect information to have a material effect on price, if it was not likely to influence either supply or demand. Rather, on the face of it, the scope of information which would, or would be likely, to influence persons who commonly invest in securities in deciding whether or not to subscribe for, or buy or sell those securities is potentially wider than information which a reasonable person would expect to have a material effect on price or value, because there is no specific requirement of materiality in the former requirement."
Another key issue that arose in Jubilee Mines NL v Riley was what is meant by the phrase "persons who commonly invest in securities", when used in the predecessor to s677. All members of the WA Court of Appeal noted that the Master whose decision was being appealed in that case had taken the view that the issue posed by that section was to be addressed by reference to those who commonly invest in securities of the kind in question - in that case, the shares of junior mining explorers. The Master concluded that those persons were traders looking to derive profit from an increase in the share price, rather than long-term investors seeking dividends. Since neither party to the appeal challenged that aspect of the master's decision, the Court of Appeal was not required to rule on the issue, although no members expressed any dissent to or doubt about the view taken by the Master.
ASIC v Southcorp Limited (No 2)  FCA 1369 was the first successful prosecution for breaching CA s674(2). In that case, the executive general manager of corporate affairs of Southcorp, a listed company, sent an email to selected analysts containing information about the likely impact of the poor 2000 vintage for premium wines on Southcorp's 2003 gross profit without providing the information to the ASX. In a negotiated settlement, Southcorp consented to a declaration that it had contravened CA s674(2) and was ordered to pay a pecuniary penalty of $100,000 plus ASIC's costs.
In ASIC v Macdonald (No 11)  NSWSC 287 (the James Hardie case), the Supreme Court of NSW held that James Hardie breached s674(2) by failing to disclose to the market in a timely manner the steps it had taken to transfer certain partly paid shares in a company that had originally been designed to provide a mechanism to fund its asbestos liabilities. The effect of the transfer was to eliminate James Hardie's liability to pay calls on the shares and therefore eliminate any further liability to pay funds towards its asbestos liabilities. The court also found that the company's CEO, CFO, company secretary/general counsel and non-executive directors all breached their duties to the company under section 180(1) as a result of their involvement in that breach of section 674(2). The CEO did not appeal the decision at first instance. The decision against James Hardie and the CFO was affirmed on appeal by the NSW Court of Appeal in James Hardie Industries NV v ASIC  NSWCA 332 and Morley v ASIC  NSWCA 331 respectively. The decision against the non-executive directors and the company secretary/general counsel was affirmed on appeal by the High Court in ASIC v Hellicar  HCA 17 and Shafron v ASIC  HCA 18 respectively.
|In ASIC v Newcrest Mining Limited  FCA 698, Newcrest was ordered to pay a pecuniary penalty of $1.2 million for breaching CA s674(2) by failing to notify ASX that its management expected total gold production for financial year 2014 to be approximately 2.2 to 2.3 million ounces and that its capital expenditure for financial year 2014 was expected to be approximately AU$1 billion (both figures being lower than the market was generally expecting at the time). The information in question had been selectively disclosed to various analysts and had therefore lost confidentiality, requiring it to be immediately disclosed under Listing Rule 3.1.|
|ASX Listing Rule 3.1|
|Once an entity is or becomes aware of any information concerning it that a reasonable person would expect to have a material effect on the price or value of the entity’s securities, the entity must immediately tell ASX that information.|
The notes to Listing Rule 3.1 give as examples of the types of things that may have to be disclosed under that rule:
|•||a transaction that will lead to a significant change in the nature or scale of the entity’s activities;|
|•||a material mineral or hydro-carbon discovery;|
|•||a material acquisition or disposal;|
|•||the granting or withdrawal of a material licence;|
|•||the entry into, variation or termination of a material agreement;|
|•||becoming a plaintiff or defendant in a material law suit;|
|•||the fact that the entity’s earnings will be materially different from market expectations;|
|•||the appointment of a liquidator, administrator or receiver;|
|•||the commission of an event of default under, or other event entitling a financier to terminate, a material financing facility;|
|•||under subscriptions or over subscriptions to an issue of securities (a proposed issue of securities is separately notifiable to ASX under Listing Rule 3.10.3);|
|•||giving or receiving a notice of intention to make a takeover; and|
any rating applied by a rating agency to an entity or its securities and any change to such a rating.
|ASX Listing Rules Guidance Note 8 - Continuous Disclosure: Listing Rules 3.1 - 3.1B has detailed guidance on the operation of Listing Rules 3.1, 3.1A and 3.1B.|
|ASX Listing Rule 3.1A|
|Listing Rule 3.1 does not apply to particular information while each of the following is satisfied in relation to the information:|
|(1)||one or more of the following 5 situations applies:|
|•||it would be a breach of a law to disclose the information;|
|•||the information concerns an incomplete proposal or negotiation;|
|•||the information comprises matters of supposition or is insufficiently definite to warrant disclosure;|
|•||the information is generated for the internal management purposes of the entity; or|
|•||the information is a trade secret; and|
|(2)||the information is confidential and ASX has not formed the view that the information has ceased to be confidential; and|
|(3)||a reasonable person would not expect the information to be disclosed.|
Note that all 3 conditions must be satisfied to qualify for non-disclosure.
|ASX Listing Rule 3.1B|
|If ASX considers that there is or is likely to be a false market in an entity's securities and asks the entity to give it information to correct or prevent a false market, the entity must immediately give ASX that information.|
The obligation to give information under LR 3.1B arises even if an exception to disclosure under LR 3.1A applies.
|ASX Listing Rule 19.12|
|An entity becomes aware of information if, and as soon as, an officer of the entity (or, in the case of a trust, an officer of the responsible entity) has, or ought reasonably to have, come into possession of the information in the course of the performance of their duties as an officer of that entity.|
|CA s675(2) – Other Disclosing Entities|
|•||a disclosing entity becomes aware of information:|
|•||that is not generally available; and|
|•||that a reasonable person would expect, if it were generally available, to have a material effect on the price or value of ED securities of the entity;|
|•||the information (for securities) is not required to be included in a supplementary or a replacement disclosure document in relation to the entity or (for managed investment products) has not been included in a PDS or supplementary PDS; and|
|•||the regulations do not exempt the information from disclosure,|
|the entity must, as soon as practicable, lodge with ASIC a document containing the information.|
This section applies to unlisted disclosing entities and to listed disclosing entities where the applicable listing rules do not have continuous disclosure requirements (s675(1)). Again, the expression "ED securities" is defined in CA s111AD. "ED securities" for an unlisted entity include any securities or managed investment products that have been offered under a disclosure document, PDS or takeover offer where the number of holders exceeds 100 (see ss111AF, 111AFA and 111AG).
CA s675(2A) makes it a civil penalty for a person to be involved in a disclosing entity's contravention of s675(2). There is a defence in CA S675(2B) if the person proves that they: (a) took all steps (if any) that were reasonable in the circumstances to ensure that the disclosing entity complied with its obligations under s675(2); and (b) after doing so, believed on reasonable grounds that the disclosing entity was complying with its obligations under that section.
|Reg 6CA.1.01 – Exemptions from Disclosure|
|The disclosure of information under s675 is not required if:|
|(a)||a reasonable person would not expect the information to be disclosed;|
|(b)||the information is confidential; and|
|(c)||at least one of the following applies:|
|(i)||the disclosure of the information would contravene a law;|
|(ii)||the information is about a matter of supposition;|
|(iii)||the information is not definite enough to make disclosure appropriate;|
|(iv)||the information relates to an incomplete proposal or a matter that is in the course of negotiation;|
|(v)||the information was prepared or created for the internal management purposes of the entity;|
|(vi)||the information is a trade secret.|
|Consequences of Breach|
|•||Criminal offence - 200 penalty units and/or imprisonment for 5 years for individuals (s1311 and schedule 3) and 1,000 penalty units for corporations (s1312)|
|•||Financial services civil penalty provision (s1317E) - civil penalty of $200,000 for individuals and $1,000,000 for corporations (s1317G(1A)) and compensation orders in favour of anyone suffering loss or damage (s1317HA)|
|•||Infringement notices imposing penalties of up to $100,000 (ss1317DAA - 1317DAJ)|
|•||Order to disclose information (s1324B)|
|•||Compensation orders (s1325)|
The size of the penalties that ASIC can impose in an infringement notice varies, depending on the market cap of the offending corporation and whether it is a first or subsequent offence (see s1317DAE).
ASIC issued its first infringement notice for a continuous disclosure breach in August 2005, resulting in a penalty of $33,000 being imposed upon Solbec Pharmaceuticals Limited. See ASIC Media Release 05-223.
See also Jubilee Mines NL v Riley  WASCA, in which a civil action for damages for breaching continuous disclosure requirements was overturned on appeal.
Return to Outline
|•||Will a Chinese wall protect you against a breach of fiduciary duty (cp Kelly v Cooper  AC 205 and Cotton v Merrill, Lynch, Pierce, Fenner & Smith (1988) 699 F Supp 251 with Slade v Shearson Hammill & Co 1974 U.S. Dist. LEXIS 13000; 1974 U.S. Dist. LEXIS 9478; 1974 U.S. App. LEXIS 5618; and 1978 U.S. Dist. LEXIS 17208)?|
|•||Should equities/research be stopped from making recommendations if corporate advisory is in possession of inside information (cp Slade v Shearson Hammill & Co)?|
|•||Do you need a Chinese wall between agency traders and principal traders?|
In relation to the first bullet point above, in Kelly v Cooper, an estate agent acted for the plaintiffs and another seller of adjoining prime beachfront properties in Bermuda. A wealthy American agreed to buy the neighbouring property and then made an offer for the plaintiffs' property. The agent did not disclose the fact that the buyer had purchased the adjoining property. The plaintiffs sued for breach of fiduciary duty arguing that had they been informed that the buyer had purchased the neighbouring property, they would have held out for a better price. The claim was rejected by the Privy Council. Lord Browne-Wilkinson, delivering the judgment of the Council, said (at p214):
"It cannot be sensibly suggested that an estate agent is contractually bound to disclose to any one of his principals information which is confidential to another of his principals. The position as to confidentiality is even clearer in the case of stockbrokers who cannot be contractually bound to disclose to their private clients inside information disclosed to the brokers in confidence by a company for which they also act. Accordingly in such cases there must be an implied term of the contract with such an agent that he is entitled to act for other principals ... and to keep confidential the information obtained from each of his principals."
In Cotton v Merrill, Lynch, Pierce, Fenner & Smith, the US District Court for ND Oklahoma held that brokers had "a primary obligation not to reveal inside information to clients for the clients' benefit in trading securities". It rejected a claim by a client of a stockbroker that confidential price-positive information possessed by the broker's investment banking division should have been passed on to its brokerage division for dissemination to brokerage customers involved in sales transactions.
However, in Slade v Shearson Hammill & Co, a class action was brought under the anti-fraud provisions of the Securities and Exchange Act of 1934 against Shearson Hammill complaining, in substance, that Shearson, an investment banker to Tidal Marine, came into possession of material adverse information about Tidal Marine and nevertheless continued promoting the sale of Tidal Marine stock to brokerage customers. Shearson Hammill applied for summary judgment on the basis that the Chinese wall between its investment banking and broking arms meant that the broking arm was not in possession of the information and therefore could not have any fiduciary obligation to the client in relation to the information. The court rejected that application and ruled that a Chinese wall could not override the broker’s obligation to act in the best interests of its client and therefore if it was aware of material adverse information about a stock in one part of its business, it had a duty to disclose that to the client or else not to recommend to the client that it trade in the stock. The judge apparently then appreciated that this would make it very difficult for multi-service firms to carry on business and asked the Court of Appeal for the Second Circuit for a ruling of law on the matter. The Court of Appeal refused to do so on the basis that it was too complex and multi-faceted a matter for it to issue a simple ruling on. The matter was finally settled before any definitive decision on the point.
In relation to the second bullet point above, some brokers seek to manage the risk that the holding in Slade v Shearson Hammill & Co presents by refusing to publish any research whatsoever on companies for whom they act as investment banker. Others simply disclose in their research that they act as investment banker for the company.
In relation to the last bullet point above, many brokers argue that having a Chinese wall between their agency traders and their house/principal traders would interfere with the role the latter can play in facilitating client orders. However, the danger of not having a Chinese wall between them is amply demonstrated by the $10 million enforcement action by the SEC in 2011 charging Merrill Lynch with securities fraud for misusing customer order information to place proprietary trades for the firm. See SEC Release 2011-22.
In a similar vein, in 2015 the HK SFC fined JP Morgan HK$30 million for compliance failings that occurred in 2012. These included a finding that JP Morgan did not have adequate systems and controls in place to guard against potential abuse of client agency order flow information, having granted 7 facilitation traders and 14 principal traders incorrect access rights to its network share drives and order management systems. As a result, principal traders were able to view client order flow information beyond their permitted access rights. The SFC also found that JP Morgan had set up a reporting structure with potential conflicts under the which the trading desk responsible for handling agency orders had a reporting line to two senior managers who were also involved in facilitation trades. See SFC Media Release dated 15 December 2015.
Return to Outline
Copyright © 2002-2016 Inhouse Legal Solutions Pty Limited ABN 16 003 663 456.