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High-flying trader lands inside: ASIC’s warning to the white-collar elite

NSW Supreme Court delivers a two year prison sentence to Sydney businessman Oliver Curtis for insider trading

No matter who you are, if you do this, we will pursue you”. Eerily reminiscent of Liam Neeson’s famous uttering in the cult 2008 film Taken, this was the official line from the corporate regulator’s luminary Greg Medcraft last week upon the NSW Supreme Court handing a two year prison sentence to ostentatious Sydney businessman Oliver Curtis.

It’s a strong message from a rejuvenated and all of a sudden well-heeled ASIC enforcement unit which has historically had difficulties in overcoming the evidentiary threshold required to secure convictions, a blight which many internal and external observers have put down to resource constraints.

ASIC relieved privately owned ASX Ltd of the unenviable task of routine surveillance and investigation of suspected market manipulation and insider trading in late 2009. Since this time, it has pursued 42 suspected cases of insider trading, banking 34 successful "enforcement outcomes". In the absence of context, this does not make for remarkable reading. However, given the inherent difficulty in detecting acts of insider trading, the corporate watchdog’s work is noteworthy.

Like our aforementioned hero, ASIC is armed with “a very particular set of skills”, relying on its statutory powers of compulsion and sophisticated data matching and trend identification software to identify market misconduct. ASIC investigators are now better placed than ever to gather incriminating information and identify suspicious trading patterns either side of a price sensitive announcement, and their recent scalps speak for themselves:

  • In March this year, former Chinese based Hanlong Mining Managing Director Steven Xiao was sentenced to 8 years and 3 months imprisonment for insider trading after netting profits of over $1.7 million across one-hundred illegal trades.
  • In March 2015, former NAB Banker Lukas Kamay and his co-accused, former Australian Bureau of Statistics employee Christopher Hill were sentenced to 7 years and 3 months and 3 years and 3 months after pleading guilty to insider trading, identity theft and abuse of public office charges.

With the maximum criminal liability for insider trading increasing from 5 years imprisonment to 10 years imprisonment in 2010, the Courts have been particularly vocal in their disapproval of so called “white-collar crooks”, with submissions traditionally relied upon by defence lawyers to reduce a sentence, actively working against their clients.

For example, factors including relative youth, good character, loss of profession, family separation, repatriation of funds and prospects for rehabilitation have been either rejected or given little weight by the Court as mitigating factors, with the NSW Supreme Court taking a particularly robust stance during last week’s sentencing of Oliver Curtis.

It was remarked by Justice McCallum that the windfall netted from Curtis’ illegal trades was used to “…fund a lifestyle of conspicuous extravagance…” and despite the best part of a decade having passed since the offending, that Curtis had exhibited no signs of progressing “…beyond the self-interested pursuit of material wealth…”. Curtis’ gesture of repaying the $1.4 million without admitting guilt was also viewed as “cynical” by the Court. Whilst acknowledging that it was never ideal for a parent to be away from his young children for an extended period of time, in deciding that a custodial sentence was necessary and appropriate in the circumstances to deter would be offenders, Her Honour implied that Curtis’ family was better equipped financially to deal with the separation than most others, thereby diminishing the persuasiveness of Curtis’ argument for a non-custodial sentence.

With ASIC’s Chairman commenting that he would have liked to have seen a harsher penalty, given the informed nature of the offending, experienced market participants are officially on notice. Mr Medcraft posed the question “if Mr Curtis had stolen $1.4 million, would his lawyers be arguing he should not go to jail?”, before adding that “…White-collar criminals and blue-collar criminals deserve equal treatment in front of the law”. Clearly, coming from a good family, obtaining a private school education and a sound reputation in the business world will no longer earn you a reprieve in the eyes of the law.

A string of high profile convictions and a $127.2 million funding package announced by Malcolm Turnbull earlier this year gives some serious bite to ASIC’s bark. A bolstered enforcement division intent on better protecting Australian consumers by identifying and punishing financial market cheats has begun to force an adjustment to the mindsets of the cowboys, rogues, and everyday market participants with a tendency to operate close to the line.

What do you do if ASIC starts making enquiries of you or your business?

The first step is to immediately seek legal advice. ASIC has a wide array of powers under the ASIC Act 2001 (Cth), the Corporations Act 2001 (Cth) and the National Consumer Credit Protection Act 2009 (Cth) to compel a recipient to:

  • Produce documents;
  • Make documents available for inspection;
  • Attend an examination and answer questions under oath;
  • Assist in an investigation; or
  • Allow ASIC officers to enter and search a premises upon presentation of a search warrant.

Your rights and responsibilities will depend on the nature of the power ASIC exercises. Your legal representative will provide you with appropriate advice in relation to how best approach responding to ASIC’s enquiries.

As a general rule, where ASIC requires that you participate in an examination and answer questions under oath, you must not provide false or misleading responses. False statements made under oath may amount to an offence of perjury.

More broadly, you must also ensure that your conduct does not constitute an obstruction or hindrance of ASIC, (for example, withholding or destroying documents requested by ASIC). It is an offence to do so.

On the advice of your legal representative, you should consider:

  • Whether you have available to you a valid claim of legal professional privilege, which may allow you to withhold certain information from ASIC; and/or
  • Whether you should seek to rely on the privilege against self-incrimination, which may protect you from liability under a subsequent criminal prosecution. Note that this privilege applies to individuals only and not companies.
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