The Australian Securities & Investments Commission has filed its first ever civil court proceedings alleging insider trading. If the case is successful ASIC may make greater use of civil powers in the future, because civil cases require a lower burden of proof and insider trading is notoriously difficult to prove, said Matthew Edwards, senior associate in the London office of Blake Dawson Waldron, an Australian law firm.
The case has been filed in the Federal Court of Australia in Melbourne against John Petsas and Marc Miot. It alleges that Petsas, a client relationship manager at the Australia and New Zealand Banking Group obtained information on an upcoming takeover bid and passed the information to Miot, who purchased call options on one of the companies involved. The pair are alleged to have made AUD128,000 (USD90,000) on the trade.
The regulator gained the power to take civil action over insider trading and other offences, including providing misleading advice, when the government introduced the Corporations Act 2001. Prior to the implementation of the act in 2002 ASIC could only take criminal action over insider trading, said Edwards. "ASIC had mixed results with criminal prosecutions," he noted. Although the ASIC has not taken civil action over insider trading before, it has brought a successful civil case against the directors of a firm that issued misleading statements.
There is growing pressure on regulators worldwide to take a tough stance on insider trading and similar abusive practices, said Edwards. Because civil cases are generally easier to prove there is likely to be an increase in the number of cases of this type, he noted. "This is not Australia specific, it's a worldwide trend," said Edwards. The pressure on regulators to bring enforcement cases has been increased by a string of scandals, including the collapse of Enron and Parmalat. Calls to officials in the ASIC enforcement division were not returned by press time. Petsas and Miot could not be located by press time.
