Insider trading conviction a warning to company directors, says ASIC Commissioner
The former chairman of failed Tasmanian timber company Gunns Limited has been convicted of insider trading and fined $50,000 following an investigation by the Australian Investment and Securities Commission (ASIC).
The investigation found that on 2 and 4 December 2009 John Eugene Gay, who served as Gunns chairman between 2002 and 2010, placed orders to sell more than 3.4 million Gunns shares.
This trading was prior to the release of Gunns’ half-year results on 22 February 2010 and while the former chairman was in possession of insider information regarding the financial performance of the company.
Following the release of company results, the Gunns share price fell substantially.
Gay faced sentencing in the Supreme Court of Tasmania earlier this month and, as a result of his conviction, will be automatically disqualified from managing corporations for five years.
He is the most senior executive to be convicted of insider trading in Australia, which ASIC Commissioner Cathie Armour said should send a message to directors to consider the information they possess when making a trading decision.
She said Gay’s conviction also highlighted the regulator’s focus on tackling such crimes and its ability to invoke its investigatory powers early.
Recently, former Royal Bank of Canada employee John Kay Jin Khoo was sentenced to 14 months jail for communicating inside information and in June 2013 former PricewaterhouseCoopers tax consultant Nicholas Glynatsis was jailed for six months after being convicted of nine charges of insider trading.
“Company policies on trading windows are not a protection for trading when a director possesses inside information,” Armour said.
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