Insider Trading Finance

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Mock Exam
Q3(a) What are the liabilities of Julius and Anthony?
Insider trading is prohibited under Div 3 of Pt 7.10 of the Corporation Act. Insider trading occurs where a person trades in shares or other financial products while in possession of price-sensitive information that is not generally available. Under s1043A(1)(c), an insider must not apply for, acquire or dispose of, or enter into an agreement to apply for, acquire or dispose of relevant “Division 3 financial products”. Section 102A defines “Division 3 financial products” to include securities, derivatives, managed investment products, superannuation products and any other financial products which can be traded on a financial market. A person is an “insider” for the purposes of the 1043A prohibition if the person possesses “insider information” and the insider knows or ought reasonably to know that the matters specified in thes1042A definition of “inside information” are satisfied in relation to the information. Section 1043A(2) prohibits an insider communicating or tipping inside information to another person. To establish a breach of s1043A(2), it is only necessary to show a communication of inside information to the tippee (the person receiving the tip).

The news of Ozoil recently engaged in an exploratory drilling program was deemed to be generally available as it has been the subject of much favourable stock market speculation. However, the actual disappointing results of the drilling program which were received by Julius were generally not available and if the information were released, it might cause the share price to fall. Since the news was price-sensitive information, Julius is considered an insider and must not dispose the shares before the news being announced. Doing so, would contravene s1043A(1)(c). Since Julius immediately sells a large parcel of shares in the company, he has already contravene s1043A(1)(c). Anthony

It is stated that Anthony decides not to sell any...
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