Insider Trading Decision Good News

Insider Trading Decision Good News

The Court of Appeal's latest insider trading decision is good news, ACT Associate Commerce Spokesman Stephen Franks said today.

"The Court upheld orders allowing investors trying to exercise rights to sue for insider trading at the expense of the company involved. They allege insider trading, and tipping by persons from the former Fletcher Challenge Group, in relation to the takeover of Southern Petroleum," Mr Franks said.

"Five Judges in the Court of Appeal have said that the words of our insider trading statute mean what they say. The message is that deep pocket defendants cannot rely on burning off complaining investors by dragging out and fighting every point at a preliminary stage.

"The Court also held that the complainants' costs to be reimbursed include the costs of getting the Court's leave to proceed at the cost of the company, now a subsidiary of Shell. So far, these costs exceed $500,000.

The trustees of the Business Integrity Trust (established with proceeds of the action against former Fletcher Challenge Chairman Kerry Hoggard) had agreed to help fund this case if the investors were forced to appeal to the Privy Council. I am very pleased that the costs award in this case will reimburse the complainants, so the Trust's assistance is not likely to be needed in the near future.

"That it should cost more than half a million dollars to reach this stage is scandalous. If the Government had not been dithering, and the law had been fixed quite simply many years ago, that money would not have been wasted. But at least the costs award now will mean they can carry on.

Regrettably, the decision does not give a clear steer on how to fix some of the loopholes and tyrannical features in our insider trading law. Fisher J in the High Court was very blunt in his criticisms of the law (`the drafter must have nodded off').

"Given the Government's dithering over insider trading law and its recent move to bring in features of the even more unsuccessful Australian law, it would have been helpful if the Court had used the opportunity to recommend a coherent property rights theory to pull together the conflicting strands in our statute. Nevertheless, as far as it goes, this is a very welcome judgment," Mr Franks said.