Hmmm ... from the Age ...
Call to bulk up insider trading laws
By Gabrielle Costa
November 21, 2003
Australia's insider trading laws need to be strengthened and made more clear to ensure financial markets are fair and inspire investor confidence, a panel of experts has told the Federal Government.
In its latest report to Treasurer Peter Costello, the Corporations and Markets Advisory Committee said the laws on insider trading should be subject to sweeping reforms.
Among the changes sought is one that would force senior executives to disclose details of trades in their company's stock.
But the panel, which is loaded with regulatory and corporate experts, stopped short of recommending that the Australian Securities and Investments Commission be given the power to fine inside traders instead of pursuing cases through the courts, such as that against prominent stockbroker Rene Rivkin earlier this year.
The committee, which has for two years been reviewing the laws that have been in place since 1991, said insider trading was the use of information that should have been provided to the market, but had not yet been.
The laws apply to trades in shares, derivatives, interests in managed investment schemes, superannuation products and government-issued debentures, stocks and bonds. Breaches can result in jail terms of up to five years, as well as fines.
The committee, which decided to review the laws off its own bat, made 38 recommendations including that:
1. Markets be informed of trades by directors and senior executives - or related parties - within two days of the purchase or sale. At the moment, only directors are compelled to release the information, within two weeks of the transaction.
2. All transactions, regardless of size, be subject to the same disclosure rules.
3. Corporate officers be compelled to reveal the details of any trades before or after they resign.
4. The laws on insider trading be clarified to reflect differences in various financial markets.
5. The laws not distinguish between general and "specific or precise" inside information used to make inside trades.
6. The law be imposed on companies that are under threat of a hostile takeover and that seek assistance from so-called white knights to effectively block a takeover bid. White knights should not be exempt either.
"Insider trading may undermine confidence in the fairness of a market and therefore its broader economic function (and lead to) unproductive uncertainty for market participants," the report said. "These laws need to be strong and fully enforceable without at the same time impeding or discouraging legitimate market activity."
But the majority of panel members did not support the concept of a fines power for ASIC, despite the companies watchdog, and the Australian Stock Exchange, backing the change.
Outgoing ASIC chairman David Knott also objected to several of the recommendations.
It is believed he was pushing for reforms that would ensure the laws were workable.
The chief executive officer of the Australian Financial Markets Association, Ken Farrow, welcomed the recommendations, saying they would help to protect a $56 trillion-a-year industry.
The office of Mr Costello did not return calls yesterday.
It is expected the Federal Government will consider the recommendations, which come as the details of the latest wave of financial services law reforms are finalised.
If passed, those reforms will give shareholders a non-binding say in executive remuneration and ASIC will have the power to issue fines of up to $100,000 against companies failing to inform the market of price-sensitive information.
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Cheers ... tight stops.
This is only my view ... read the red stuff.
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