Insider Trading and Market Manipulation

Question: Discuss about the Insider Trading and Market Manipulation. Answer: Introduction: In Kamay v The Queen case, judge held that the offence committed by the applicant is an example of very serious offence and this case is the worst case of insider trading in the history of the country. In this case applicant earned profit of $8 million, which is the largest profit in case of insider trading. Judge further said that from December 2010, imprisonment in case of insider trading was increased up to 10 years and legislature also increase the penalty on insider trading which shows the seriousness of the offence. His Honour also mentions that the seven year imprisonment was the largest imprisonment ever imposed in the country for insider trading. Applicant said that the seriousness of offence is measured from the investment of amount and profit earned by the applicant rather than the factors such as position of the applicant, whether or not applicant is a true insider. On this statement of applicant crown argued that the profit earned by the applicant is an important factor because applicant earned large profit from the small amount of investment. Judge held that in various situations amount of profit earned and amount of investment is a good indicator to measure the seriousness of case (Sydney Morning Herland, 2015). In the case of R v Curtis, judge impose the punishment on the facts of general deterrence and also because adequate punishment for the offence of insider trading is necessary. Judge like to consider the general deterrent effect of the punishment on the offenders. In the opinion of judge Mr. Curtis is not going to repeat his mistake, therefore there is no need for any personal deterrence. Court held that punishment of imprisonment is necessary in case of white collar crime. White collar crime is a crime in which, offender is a well educated and reputed person but still commit an offence with a view to earn profit. Secondly, Court imposed punishment to achieve the principle of parity, because Mr. Hartman is also punished by the court (Whitbourn, 2016). Applicant file appeal on the following grounds: The learned sentencing judge does not properly discriminate the four offences of insider trading. The learned sentencing judge measures the seriousness of case from the amount of investment and profit earned by the applicant. The learned sentencing judge discriminate between the applicant and Mr. Hill, by imposed different penalties and imprisonment for the same offence. The learned sentencing judge make mistake by imposing individual sentences. The learned sentencing judge make mistake by ordering the collective imprisonment for charge 11. Ground 1 and 2 deals with the four charges of insider trading and also the difference between the punishments imposed on these four charges. Applicant mentions that sentencing judge clearly give importance to the amount of profit earned and imposed penalties and imprisonment on the basis of profit earned by the applicant. Therefore judges together deal with the grounds 1, 2 and 4. Applicant argued that sentencing judge consider the amount of investment and profit earned by the applicant rather than other factors such as position of the applicant, whether or not applicant is a true insider. Judge said that the profit earned by the applicant is an important factor because applicant earned large profit from the small amount of investment. Judge held that in various situations amount of profit earned and amount of investment is a good indicator to measure the seriousness of case. Judge further said this case involves the largest amount of profit made from insider trading in the country. Therefore judges dismiss these grounds for appeal. In the ground 3 Mr. Kamay said that sentencing judge discriminate between the applicant and his co-offender by imposing different penalties and imprisonment. Applicant said in this case principle of parity must be applicable. applicant argued that Mr. Hill was also involve in the serious offence and he also breach the trust, but still sentencing judge give different punishments. Applicant further said that this difference violates the principle of parity. Judge did not accept this argument and said that on the same offence both the offenders get same punishment that is 2 year imprisonment and cumulation of 6 months. Both the offenders also receive punishment of 3 months imprisonment for their similar charges of theft, but both the offenders play different role in this case. Mr. Hill was charged for public offence where Mr. Kamay was charged for insider trading and money laundering. Therefore in this case judge cannot apply principle of parity. Judges dismiss the ground 3. In ground 5 applicant said that sentencing judge wrongly impose cumulation of 3 months for charge 11 because element of concealment is not present in charge 11. In the opinion of judge sentencing judge does not make any mistake regarding the cumulation of 3 months in charge 11. Judge also fails the ground 5. Therefore, appeal made by Mr. Kamay is dismissed by the court. Principle of Parity: The principle of parity ensures the equality before the law. According to this principle all the cases of similar nature should receive the similar treatment and cases of different nature must be treated differently. This can be understood with the help of the case law of Green v The Queen(2011) 244 CLR 462 at [28]. The main objective of this principle is to avoid the discrimination in giving punishments between the offenders who are involved in the same criminal conduct. Many problem related to parity are raised in the appeal by the co-offender, these problems can be ignored if sentencing judge give similar punishments to the co-offenders on same time. This can be understood with the help of case law Postiglione v The Queen (1997) 189 CLR 295 (Networked Knowledge, n.d.). If co-offenders are not treated in the same way by the same judge, then in such case questions will rise whether second Judge is bound by the opinion of the first Judge. In case of Baquiran v R [2014] NSWCCA 221, court held that second judge is not bound by the opinion made by the first Judge. In the case Lowev The Queen(1984) 154 CLR 606, Court held that law does not define any rule which mention that co-offenders are sentenced with same punishment for the same offence committed by them. Circumstances of offenders are different therefore it is necessary that offenders treated differently for the same offence. Principle of parity is applied differently in case of crown appeals. In the case of R v Borkowski (2009) 195 A Crim R 1 at [70], Howie J said that the objective of crown appeal is not to increase the sentence of a particular individual, but it has a wide scope which aims at achieving the consistency in the establishment of principles related to sentencing (Judicial Commission of New South Wales, 2015). In this present case, Mr. Kamay mention in ground 3 that sentencing judge discriminate between the applicant and his co-offender by imposing different penalties and imprisonment. Applicant said that principle of parity must be applicable in this case. Court held in this case that offenders are charged with different offences and there is no discrimination between the offenders. Judge further said that in this case both the offenders play different role and differently involve in the criminal conduct, therefore both the offenders get different punishments from the sentencing judge. For the same offence both the offenders get same punishment such as charge 6 for insider trading both the offenders get imprisonment of 2 years and cumulation of 6 months. Both the offenders also receive punishment of 3 months imprisonment for their similar charges of theft, but disparity arise due to different offences committed by both the offenders. Mr. Hill was charged for public offence where Mr. Kamay was charged for insider trading and money laundering. Therefore in this case judge cannot apply principle of parity. Role of Australian Securities and Investments Commission in these cases are: Australian Securities and Investments Commission plays very important role in the cases of insider trading. ASIC is regulator of securities market in Australia and ASIC is also responsible for detecting, investigating and taking actions in case of insider trading. ASIC also has power to take actions which are administrative in nature. Before 1st August ASX is responsible for the conducts of security market but from 1st August this responsibility is transferred on ASIC (ASIC, n.d.). In Kamay v The Queen case, Australian Securities and Investments Commission and the Australian Federal Police start joint investigation after receiving report from Pepper stone and Axicorp on 21st February 2014, these reports mention the facts of trading which was suspicious. AFP and ASIC jointly investigate the matter with the help of the AFP-led Fraud and Anti-Corruption Centre. Through their investigation they discovered that associate director of NAB was receiving the information which is not available to the general public and considered as price sensitive information from his friend Mr. Hill, who also worked as an analyst with the ABS (ASIC, 2015). On 9th may 2014 police execute search warrants at their residence and seized some items, and police also arrested both the offenders on the same day. After arresting the offenders, investigators took interview of the offenders and ask some questions but they did not receive any relevant answer of the questions. Investigators take second interview on 3rd July 2014 in which applicant accept all the offences he committed. In the case of R v Curtis, ASIC brought charged against Mr. Curtis, who has found guilty in the case of insider trading. This case was conducted for three weeks by the Supreme Court of New South Wales and on 2nd June 2016, court held that Mr. Curtis was involved in the transactions of insider trading. Mr. Curtis and Mr. John Hartman were entered into an agreement for sharing the price sensitive information. Mr. Curtis traded almost 45 times on the basis of price sensitive information provided by Mr. Hartman. Mr. Curtis earned profit of $ 1 million from these trading transactions (ASIC, 2016). In Kamay v The Queen case, Mr. Hill and Mr. Kamay enter into an agreement in which Mr. Hill gives price sensitive information to Mr. Kamay which is not published for general people. Mr. kamay use that information to customize the trade of margin FX contracts in the foreign exchange derivatives market. Mr. Kamay open account with Pepperstone and Axicorp and deal in the Margin FX Contracts on the basis of the information provided by Mr. Hill. Mr. Kamay made profit of $8 million from these dealings and also show some loss so that these deals were looks natural deals. These trading of Mr. Kamay were considered as insider trading (Austlii, 2015). In the case of R v Curtis, Mr. Curtis and Mr. John Hartman were entered into an agreement for sharing the price sensitive information. Mr. Curtis traded almost 45 times on the basis of price sensitive information provided by Mr. Hartman. Mr. Curtis earned profit of $ 1 million from these trading transactions. Conduct of Mr. Curtis and Mr. Hartman was considered as offence of insider trading (Supreme Court of New South Wales, 2016). References: ASIC, (2015).15-058MR Two men sentenced in Australias largest insider trading case. Retrieved on 21st September 2016 From: https://asic.gov.au/about-asic/media-centre/speeches/insider-trading-and-market-manipulation/. ASIC, (2016). 16-180MR Oliver Curtis found guilty of insider trading conspiracy. Retrieved on 21st September 2016 From:https://asic.gov.au/about-asic/media-centre/find-a-media-release/2016-releases/16-180mr-oliver-curtis-found-guilty-of-insider-trading-conspiracy/. ASIC. Insider trading and market manipulation. Retrieved on 21st September 2016 From: https://asic.gov.au/about-asic/media-centre/speeches/insider-trading-and-market-manipulation/. Austlii, (2015). Kamay v The Queen [2015] VSCA 296 (13 November 2015). Retrieved on 21st September 2016 From: https://www.austlii.edu.au/cgi-bin/sinodisp/au/cases/vic/VSCA/2015/296.html. Judicial Commission of New South Wales, 2015. Sentencing Procedures Generally. Retrieved on 21st September 2016 From: https://www.judcom.nsw.gov.au/publications/benchbks/sentencing/parity.html#p10-820. Networked Knowledge Law Reports. Mario Postiglione v The Queen [1997] HCA 26; (1997) 189 CLR 295; (1997) 145 ALR 408; (1997) 71 ALJR 875. Retrieved on 21st September 2016 From: https://netk.net.au/Australia/Postiglione.asp. New south wales: case law. Supreme Court New South Wales. Retrieved on 21st September 2016 From: https://www.caselaw.nsw.gov.au/decision/576b84c0e4b058596cb9ca74. Sydney Morning Herland, (2015). Insider trading masterminds Lukas Kamay, Christopher Hill jailed after Block bid. Retrieved on 21st September 2016 From: https://www.smh.com.au/business/banking-and-finance/insider-trading-masterminds-lukas-kamay-christopher-hill-jailed-after-block-bid-20150316-1m0tzu.html. Whitbourn M. (2016). Oliver Curtis insider trading trial: what the jury didn't hear. Retrieved on 21st September 2016 From: https://www.smh.com.au/nsw/oliver-curtis-insider-trading-trial-what-the-jury-didnt-hear-20160531-gp87p8.html.