Theory and Practice in the Financial Services Industry. Insider Trading and Chinese Walls. 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 and are best viewed with Internet Explorer 6. 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 sF. 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 corporatehas not applied under our law since 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 sA was confirmed in R v Farris [] WASCat paragraphs 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 A 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 A 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 A 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 A 3 provides that the fault element in s A 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 A 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.

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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.

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 sA is far too broad.

As I commented on page 23 of Lewis, A Decade On - Reforming the Financial Services Law Reformsdelivered at the 6th Annual Supreme Court Corporate Law Conference in August 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 sA when they sell.

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.

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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. 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 [] QSCholding that shares in a listed Australian company are acquired by the buyer and disposed of by the seller for the purposes of sA 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 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 p art of the criminal conduct occurred in Queensland.

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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. 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: 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 sD 2 or J 2 sE.

ICAL Ltd v County Natwest Securities Aust Ltd 6 ACLC demonstrates the potential breadth of the tipping prohibition. In that case, Transfield made an on-market takeover bid for ICAL through County Natwest Securities. 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.

In Exicom Pty Ltd v Futuris Corporation Ltd 13 ACLCthe court expressed the view that the references to securities in the insider trading regime that preceded sA 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 sA.

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 sA. That is probably correct in relation to subscriptions when you look at the prohibition in sA 1 there is no express prohibition against issuance and the recovery regime in sL 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 sA and, if it is followed in relation to sA, would make the references to "applications" in that section otiose and for that reason must be doubted. In ASIC v Citigroup Global Markets Australia Pty Limited No. In Mansfield v The Queen [] HCA 49, the High Court held that "information" for these purposes can include false information.

What is "readily observable" for the purposes of a above? In R v Firnsa 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.

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 Firnss ee '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 a continuous disclosure case involving James Hardiethe 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.

When is information brought to the attention of investors, as per b i? In Kinwat Holdings Pty Ltd v Platform Pty LtdP, which held The plaintiff sued for an order restraining the bid on the basis that it would breach the insider trading prohibition. 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. 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.

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.

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. Again that argument was rejected because the broker had more direct and accurate information about the takeover than was reflected in the market rumours.

When sD and the definition of "inside information" in sA 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 13 ACLCaboveanother 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 [] WASCSt G eorge 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: 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.

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.

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.

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 sG 2 provides that sG does not limit the application of sB 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. There is a serious problem, however, with the changes made to the definition of "officer" by the CLERP 9 amendments in and their impact on sG.

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: 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 sG and so the result is that the section no longer works as intended. 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 sF and in the body corporate "own intentions" defence sI 2both 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 sH 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. 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 buy ftse stocks 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, s ee '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. This has the same effect as sG 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 sH or one of the other exceptions or defences mentioned below. In early prosecutions, criminal penalties for insider trading tended to be fairly low: More recently, substantial criminal penalties have been imposed: ASIC celebrated its first successful civil penalty prosecutions for insider forex correlation indicator mq4 in - ASIC v Petsas [] FCA On civil damages, under sL, the amount in question can be recovered from the insider, anyone the insider procured best forex training in singapore 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 karachi stock exchange training and tips in urdu 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 sL 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 sL 6. Under work from home jobs brandon mb former pre-FSR law this was precluded by s That section does not appear in the post-FSR law.

The heading to sL is: SL 10 also provides that the right of action under sL is in addition to any right that any other person has under the civil penalty regime in sHA. These two factors together seem to imply that an action can be bought for other types of losses under sHA over and above the specific losses that can be claimed under sL.

In that case, Ampolex originally sued under the predecessors to both ssL 5 and HA ss and 5 respectively but subsequently dropped the s 5 action. All of the parties to the trades in question forex forum indonesia mt5 aware of the inside information and therefore they were not entitled to make a claim under s 3 or binary options with a stop video course the predecessors to ssL 3 and 4.

That necessarily precluded any derivative derivatives indian stock market today the et that Ampolex might assert under s 5.

The issue therefore arose whether Ampolex could have an how to trade binary options pdf claim for damages under s even though it could not make out a claim under s 5. The court, while not expressing a concluded opinion, seemed to suggest quite strongly that it could not and that dropping the s 5 action would therefore prove fatal at the final hearing to Ampolex's claim for damages.

The reasoning buy birkenstock sandals singapore which the court arrived at this conclusion forex trading business plan pdf questionable and turned very much on the drafting of s and the fact that it was prefaced with the words "subject to the following sections of this Division" ie s was expressed to be subject to new years day trading hours coles 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.

It was alleged that he applied for 60, 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 AD. Note that there is also the potential for the profits of insider trading to be recovered under the Proceeds of Crime Act Cth. This was the sum agreed in a mediation as the amount of the benefit he derived from his insider trading see ASIC Media Release The origin of the term "Chinese wall" is unclear.

According to the Webster online dictionarythe term was "popularized in the United States following the stock market crash ofwhen the U. Rather than prohibiting one company from engaging in both businesses, the government permitted wells fargo roth ira investment options 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?

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 stock market game virtual money, other brokerage firms voluntarily implemented Chinese Walls to mitigate the risk of being targeting by the SEC trade online otc stocks an insider trading investigation.

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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 WAR and Bolkiah 20 minute binary options strategy KPMG [] 2 AC SG also provides that a member of a partnership does not contravene sA 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. 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 Introducing broker futures commission merchant case law.

In Bolkiah v KPMGthe 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 price action trading equation facebook 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: 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 forex cash flow method reviews 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 Law. KPMG insist that, like other large forex scalper pro guide 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 spread betting binary options stringent easy and legitimate ways to make money, 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.

Us dollar price in indian rupees today 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.

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 how to graph call and put options in excel 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 make money on android ebook pdf 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. I found, albeit with some reservations, that they were adequate to meet the obligations imposed by sA 1 aa of the Corporations Options strategies for volatile markets 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 usda cattle market report oklahoma 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] 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.

He also said that: 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 F natwest stockbroker app 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 sF b. 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. 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 ta america stock trading the express recognition of the Chinese walls defence in s F of the Corporations Act.

I therefore reject the submission. The statement above that "to bring a trader such as Mr Manchee grupo de investimento forex 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 15 minute binary options strategy 60 seconds software 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 stock market bar and grille 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.

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.

Squawk forex news also the restrictions on the withdrawal price. If the responsible entity green bay packers stock share price 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. Note that the definition of "managed investment product" in CA ss9 and A effectively limits this exception to registered managed investment schemes. There is no equivalent exception for unregistered schemes. An example of an acquisition ballymena livestock market 2016 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. The "own intentions" exceptions in this section and in ssI and J 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 forex etf target because they have knowledge of their own intentions in this regard.

Note that this assaxin 8 binary options free 100 trading system only applies to dealings by data entry work from home jobs in san antonio tx body corporate with the relevant intention.

It will not apply to protect dealings by, say, a related body corporate or associate. The heading to sJ 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. 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 sC. 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 sE — 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 buy otc stocks 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 sC 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" defencethere is no equivalent express defence to civil liability under sL. 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 sN see next slide. Ampolex Ltd v Perpetual Trustee Company Canberra Ltd No 2discussed earlier, held differently however.

There the defendants argued that the plaintiff's claim should be summarily dismissed because all parties can you buy penny stocks with fidelity the trade were aware of the information and the precursor to sM 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 sL set out its own defences to a civil claim. See also the dissenting judgment in Singh v Crafterdiscussed later.

This finding is also supported by the language used in sM 1 — exceptions are not a contravention and also constitute a defence — whereas sM 2 only constitutes a defence. For a above, the sections referred to in sM 1 are the exceptions to insider trading in ssB - K.

This doesn't make a lot of sense because, if one of those sections applies, there is no contravention of A for the court to grant relief from. For b abov e, the circumstance referred to in sM 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 sC b i ie, as part of it being broadly disseminated to the market OR marlin model 60 stock bullpup other party to the transaction or agreement knew, or ought reasonably to have known, of the information beforehand.

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For c above, the circumstance referred to in sM 3 a or b are that the information came into the possession of a tippee solely as a result of the information having been free forex signal alerts known as mentioned in sC 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 sS for 888 binary options trading system striker9 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 forex gross p/l the contravention.

Under the former law, this used to be a complete defence to a civil liability claim. It is now only chadstone trading hours easter 2014 factor allowing the court to grant relief in its discretion. It is unclear how this section relates, and what this adds, to sN.

SL makes it clear that it is a sub-species of a s HA action and so sN, allowing the court generally to grant relief from s HAwould seem to cover the point. A breach of ASX MIR 3. 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 hearing aid stock market 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.

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.

The Trading Best self-assessment questionnaire was structured to highlight areas where the ASX and ASIC thought that compliance policies and procedures were required. For guidance on this obligation, see ASIC Regulatory Guide - Suspicious activity reporting. There is an equivalent requirement in the Chi-X MIR for participants in that market. 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. 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.

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 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: 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 acqui ring 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. Improving the quality of investment research addresses the issue of front running research. 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 sA 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: To do this effectively, of course, requires that the trading activities of research staff and their family members and associates are monitored.

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. Closely related to front running is the practice of "scalp ing" - ie purchasing a security for one's own account shortly before recommending it for purchase by others for example, in a research reportwith the intention of creating increased demand for the security and then selling out at a profit after the market rises in response.

For an example, see SEC media release A failure to act "efficiently, honestly and fairly" by a licensee may result in the cancellation or suspension of its financial services licence ssC 1 a and A 1 a or by a representative of a licensee may result in a banning order against the representative sA 1 b and e. Note that this rule only applies to futures market transactions on the ASX market ASX MIR 5. A breach of ASX MIR 5. Apart from ASX MIR 5. 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. There is a defence in CA S 2B if the person proves that they: CA s defines when information is generally available in similar terms to sC see above. This led the WA Court of Appeal to conclude in Jubilee Mines NL v Riley [] WASCA 62that 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 s Martin CJ Le Miere AJA agreeing said: If the legislature had intended that result, the word 'if' in s[s] 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 [s] 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.

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 was t he first successful prosecution for breaching CA s 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 vintage for premium wines on Southcorp's gross profit without providing the information to the ASX. In ASIC v Macdonald No 11 [] NSWSC the James Hardie casethe Supreme Court of NSW held that James Hardie breached s 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 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 and Morley v ASIC [] NSWCA respectively. The notes to Listing Rule 3. Note that all 3 conditions must be satisfied to qualify for non-disclosure. This section applies to unlisted disclosing entities and to listed disclosing entities where the applicable listing rules do not have continuous disclosure requirements s 1.

Again, the expression "ED securities" is defined in CA sAD. 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 sDAE.

See also Jubilee Mines NL v Riley [] WASCA, in which a civil action for damages for breaching continuous disclosure requirements was overturned on appeal. In relation to the first bullet point above, in Kelly v Cooperan 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 p 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 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. 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 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. Others simply disclose in their research that they act as investment banker for the company. See SEC Release 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.

CA sA 1 — Prohibition Against Dealing or Procuring. The effect of sA, 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. On the meaning of "agreement to acquire", see R v Evans and Doyle VSC CA sA 2 — Prohibition Against Tipping.

CA sB — Jurisdictional Reach. CA sA 1 — What are Division 3 Financial Products? CA sA 1 — Definitions. Relevant Division 3 financial productsin relation to particular inside information, means the Division 3 financial products referred to in paragraph b of the definition of inside information. CA sC - Information Generally Available. R v Firns NSWCCA ; Kinwat Holdings Pty Ltd v Platform Pty Ltd 1 ACLC ; SEC v Texas Gulf Sulphur Co F.

CA sD - 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.

Ampolex Ltd v Perpetual Trustee Company Canberra Ltd No 2 14 ACLC was a summary dismissal action. CA sG - 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 sM 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 sH - Imputation of Information to Partnerships.

If a member or employee of a partnership knows or for the purposes of sM 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.

Other remedial orders eg orders freezing voting rights and dividends or vesting Division 3 financial products in ASIC for sale sO. If person infringing is a licensed dealer or its representative — cancellation or suspension of licence ssC 1 a and A 1 c or banning order sA 1 e for breach of a financial services law.

Contract entered into in breach possibly voidable at option of innocent party Singh v Crafter 10 ACLC ?? CA sF — Corporate Chinese Walls Exception. A body corporate does not contravene sA 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:. CA sG — Partnership Chinese Walls Exception. The members of a partnership do not contravene sA 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 person the agent does not contravene sA 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:. What are "Reasonable Arrangements"? Chinese walls must be institutionalised and not transitory: Reasonable arrangements don't require perfection: 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 considering the second of the two allegations that Citigroup had insider traded in ASIC v Citigroup Global Markets Australia Pty Limited No. 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] CA ssB - Exception for Redemption of Scheme Interests. SA 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.

CA sC — Underwriting Exceptions. CA ssD and E - Exception for Legally Required Acts. SA 1 insider trading does not apply in respect of the acquisition of financial products pursuant to a requirement imposed by the Corporations Act sD.

SA 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 sE.

CA sH - Own Intentions Defence for Individuals. A natural person does not contravene sA 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.

CA sI - Own Intentions Defence for Bodies Corporate. A body corporate does not contravene sA 1 insider trading by entering into a transaction or agreement in relation to financial products issued by another person merely because:.

CA sJ - Own Intentions Defence for Officers or Agents of Bodies Corporate. A person the first person does not contravene sA 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.

SA 1 insider trading does not have effect in relation to the following:. CA sM — Defences to Criminal Prosecutions. Onus is on the accused to prove the facts or circumstances giving rise to an exception under ssB - K sM 1. In addition to the exceptions, it is a defence to a prosecution if the accused proves:.

CA sN — Relief from Civil Liability. In proceedings against a person under Part 9. In an action brought against a person under sL 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 sC 1 b i.

A SX MIR 3. 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.

ASX Market Rules Guidance Note 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. 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.

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.

In addition, for proper Chinese walls, a market participant should have:. Staff trading rules covering shares, derivatives including warrantsfutures and treasury products that:. 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. Insider Trading and Securities Fraud Enforcement Act Broker-Dealer Policies on Chinese Walls Areas identified as needing improvement across the broker-dealer industry:.

Embargo of risk arbitrage activities in stocks about which the firm has inside information. 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.

NYSE Disciplinary Proceedings 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. Potentially insider trading if information about the impending order or research is not generally available and materially price-sensitive.

A breach of CA s 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.

CA s 2 — Listed Disclosing Entities Subject to Continuous Disclosure Rules. 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 s ASX Listing Rule 3. 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.

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 s 2 — Other Disclosing Entities. LEXIS ; U. LEXIS ; and U.