Insider Trading: Greed

The world of insider trading was brought to light recently with the court case of John Hartman, an ex-Orion equities dealer. Hartman had been sentenced 4 and a half years jail and a non-parole period through to December 2013. The sentencing judge Justice Peter McClellan had said that, "Paying $350,000 to a … graduate in his early 20s carrying out a task of modest responsibility underlines the extent to which the values which underpin our society can be compromised". As a 20 year old Economics graduate from the University of Sydney, through his insider knowledge, Hartman was able to profit more than $1.9 million by trading CFDs. (contracts for difference). He was also found guilty for tipping off his friend Oliver Curtis of insider knowledge.

Greed

What is responsible for motivating anyone to insider trading? The answer is simple: greed. A lot of people have access to privileged and inside knowledge. It never happens by accident. It is a pre-meditated action, you need to take your knowledge and physically make the calculations, move money around and execute a trade.

Insider Trading in Australia

According to the Australian treasury department, 'insider trading' is the trading of securities (stocks, financial derivatives, etc) while in the possession of materially-sensitive information that is not publicly available.

Australian insider trading prohibitions are detailed in the Corporations Act 2001, Part 7.10, Division 3 where it details prohibited conducts, relief and defence options. The basis for the laws is not based on fiduciary duties or the theory of misappropriation but rather to promote market fairness and market efficiency. There is an interesting transcript called Insider Trading and market Manipulation, which was a speech from August 2010 given by Tony D'Alosio, the chairman of ASIC.

From 1 August 2010, the Australian Securities and Investments Commission (ASIC) has took over the role of the responsibility of for market oversight and surveillance from the ASX. The switch in responsibility was due to possible conflicts of interest when the ASX became a publicly listed company.

Prosecuted Insider Traders

Here is a list of a sample of prosecuted insider traders in Australia with links to their news on the ASIC website:

• Oswyn de Silva, a former Macquarie Bank portfolio manager
• Peter Robert Woodland, a share trader
• Mukesh Panchal, a former Queensland Gas Company Ltd (Queensland Gas) executive and company secretary
• John Petsas, a client relationship manager at the Australia and New Zealand Banking Group Limited and Marc Miot
• John Francis O’Reilly, a former director of Lion Selection
• Mark Richard McKenzie, a broker
• Dr Jeffery James Bateson, a former director of WHL Energy
• Noel James Stephenson
• Roberto Gerald Catena, Colin Edward George Hebbard and Flemming Hood Nielsen
• A general list of people at the end listing convictions and civil penalties of insisder trading