Citigroup Australia: Not Guilty
June 28th 2007 04:45
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The case of Citigroup Australia accused by ASIC of insider trading concluded with the law siding the corporates. The corporate regulator accused Citigroup Australia of insider trading on 19th August 2005 for proprietary trading of Patrick Corp shares which was a takeover target by Toll Holdings which Citigroup was advising.
It was a case that brought up the issue of "Chinese Wall" within a firm that simulataneously runs several operations that could invite potential conflict of interests. Citigroup was the advisor to Toll and therefore had the responsibility of preventing insider information being used by other operations within the company such as its trading desk.
ASIC alleged that Citigroup broke insider trading laws when two employees, a trader and a corporate investment advisor exchanged information regarding the impending takover during a smoking break. The information was used by the trader for proprietary trading as alledged by ASIC.
However, the court finds the event without basis and applied section 9 of the Corporations Act at the strictest term, that is the Citgroup trader was not a corporate officer and therefore the basis of insider trading cannot be established.
This could set a legal precedent that insider trading only pertains to officers, substantional shareholders or anyone with corporate control. Although the ending of the Citigroup case seems to augur well for the corporate arena but the implication would be ASIC attempting to push tighter laws that may prevent employees at all levels from trading shares in their company.
Australian corporate legislation may add more pages which means more regulation.
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