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Corporations Law - Insider Trading

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Added on  2019-10-31

Corporations Law - Insider Trading

   Added on 2019-10-31

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Corporations Law - Insider Trading_1
INSIDER TRADING2IntroductionInsider trading refers to the buying or selling of the securities of the company by such an individual who has the access to the confidential or material personal information regarding suchsecurities of the company. Depending upon when such trade was made, the insider trading could be lawful or unlawful. Particularly when the material confidential information is still not made public, the trading is illegal1. Every jurisdiction has different insider trading norms and in the following parts, the insider trading norms as are applicable in Australia and Hong Kong have been highlighted to draw a comparison between them.ComparisonThe insider trading laws of Australia is covered under “Division 3’s Part 7.10 of the Corporations Act, 2001”2. Further, these laws are enforced by the ASIC, i.e., the Australian Securities and Investments Commission3. On the other hand, the laws related to insider trading inHong Kong are covered under Division 4, Part XIII under the civil regime, and for the criminal regime, under “Division 2 and Part IV of the Securities and Futures Ordinance”4. Further, these are controlled by the “Securities and Futures Commission” of Hong Kong5. In both these jurisdictions, there are four traditional premises to validate the exclusion, and these are four are (a) the fiduciary duty theory, (b) the misappropriation or fraud theory, (c) the market integrity theory and (d) the equal access to information theory. The fiduciary duty 1 Paul U. Ali and Greg N. Gregoriou, Insider Trading: Global Developments and Analysis (CRC Press, 2008)2 Corporations Act, 2001 (Cth)3 Michael J Duffy, ‘Insider trading: Addressing the continuing prob-lems of proof’ (2009) 23 Aust Jnl of Corp Law149.4 Securities and Futures Ordinance5David C. Donald, A Financial Centre for Two Empires: Hong Kong's Corporate, Securities and Tax Laws in its Transition from Britain to China (Cambridge University Press, 2014)
Corporations Law - Insider Trading_2
INSIDER TRADING3theory cannot be applied to such an individual who is not lawfully fiduciary for instance the major shareholders. Though, in both the jurisdictions, it was recently observed that it is more based on the market integrity theory and the fraud theory. For Australia, the case of Regina v Xiao6 was the one in which the MD of the company had confessed to insider trading and got 8 years as jail term which was the longest sentence in insider trading cases in the nation. Here, the emphasis of Hall J was laid on fraud and cheating. Similarly, in the Hong Kong case of HKSAR v Du Jun7, the Hong Kong Court of Appeal awarded a 6.3 years as jail term based on the Englishcase of Regina v Christopher McQuoid8 on the basis of cheating/ fraud element. There is a similarity in the central composition of these two systems as the jurisdictions of both these entail civil and criminal provisions, as per which, a beach of insider trading provisions could attract both civil and criminal liabilities. In the Australian Regime, section 1042A of the Corporations Act provides a non-exhaustive definitive of financial products as any such financial product which can be traded on financial market9. In the regime of Hong Kong, the prohibition on insider trading is laid down on the derivatives or the listed securities. The listed securities are defined under section 245 of the Securities and Futures Ordinance, which is an exhaustive definitive and has to relate to listed companies10.Under both of these regimes, the information which is used needs to have material effect over the prices of the financial product or of securities. In the regime of Hong Kong, save for providing in case the information is in general known, it would likely have a major impact over the prices of the listed securities, does not have further provisions with regards to what the 6 [2016] NSWSC 2407 CACC 334/20098 [2009] EWCA Crim 13019Corporations Act 2001, s1042A10 Securities and Futures Ordinance, s245
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