A Glance At Insider Trading Activities in Australia

The practice of buying or selling the securities of a publicly traded company based on some non-public material information refers to insider trading. Such type of trading is illegal and is closely monitored by the respective regulators in different countries.

However, when an insider of a company like a manager, director or an executive buy or sell the stock of their own company based on publicly available information, it is termed as insider buying and selling. This is a legal form of insider trading as the transactions are disclosed legally to the respective regulators.

Insider Trading Rules in Australia

According to the Australian Institute of Corporate Directors, the company’s directors should be aware of the Corporations Act 2001 provisions (Division 3, Part 7.10) that prohibits illegal insider trading. In Australia, the persons with non-public inside information cannot trade financial products or securities or enter into agreements to trade. They cannot get another .0person enter into agreements to trade and are not allowed to directly or indirectly share the information with others who might take trade advantages.

In Australia, the directors of the company are required to inform the market about every share transaction made by them in their company. The Australian Stock Exchange requires the directors to lodge an Appendix 3Y Notice (Change of Director's Interest Notice) within five business days.

The ASIC or Australian Securities and Investments Commission governs the laws related to financial markets, corporations and financial services in Australia. The regulator may take action against a company or an individual for not complying with the laws. Any misconduct in the share market, including continuous disclosure and misleading statements, market manipulation and insider trading can be reported to the regulator.

The insider trading offence earlier carried a maximum penalty of 5 years imprisonment or a fine of $220,000 in Australia. Since 13^th December 2010, Australia has increased the maximum penalty for insider trading to the greater of imprisonment for ten years or a fine of $495k or thrice the profit gained, or loss avoided.

Legal Insider Trading

The insiders’ buying and selling activities help investors limit incorrect interpretations. The mass buying or selling activities of a corporate insider can help investors predict the company’s future plans. It works as a valuable tool in analysing investments. However, the analysis of corporate insider trading activities can be sometimes tricky. The excessive selling of shares by a corporate insider does not always mean that the company is in trouble. There is a possibility that the insider is selling more because he needs some extra cash. Investors often tend to ignore the reason for the selling activity and just look at the transaction.

On the other hand, the buying activity of corporate insiders gives a positive signal to investors about the company’s position. The insider selling could be done for multiple reasons while insider buying generally indicates that the price of the stock might improve in the future.

ASIC on Illegal Insider Trading

Recently, ASIC found a surge in suspicious trading ahead of significant announcements by the companies and decided to ramp up its scrutiny over the brokers. According to ASIC, the volume of shares traded before an announcement, particularly related to the materials sector was suspicious. The trading before the announcements related to the mergers and acquisitions were more questionable. ASIC is now keeping an eye on the companies in the material sector and has recommended these companies to put in place robust information security measures as soon as possible.

In June this year, a hacker was sentenced to an imprisonment for 3 years after he was found guilty to eleven charges that included insider trading. The investigation was conducted by ASIC that revealed the involvement of hacker in gaining access to the unpublished stock reports of an independent media company.

ALSO READ: Retail Food Group’s Share Trading Under Surveillance By ASIC

Examples of Legal Insider Trading

Apart from gaining fundamental and technical knowledge about the companies, investors also keep an eye on the selling and buying of shares by the corporate insiders in order to make the right investment decision. Recently, directors of many Australian companies have conducted buying and selling activities which might be essential for the investors. Let us have a quick look at few of such insider trading examples below:

Insider Buying Activities in Australia

Cadence Capital Limited (ASX: CDM) - The company’s director, Mr Karl Peter Siegling, indirectly acquired 8,000 ordinary shares via an on-market trade on 17^th July 2019, at a consideration of $6,137.28. The director now holds a total of 22,386,930 ordinary shares post the acquisition.

The stock of the company closed the day’s trading session flat at AUD 0.765 on 18 July 2019.

QV Equities Limited (ASX: QVE) - On 16^th July 2019, the company’s director, Mr Peter McKillop, directly and indirectly acquired 30,000 ordinary shares via an on-market trade at a consideration of $31,330. The number of securities held by the director has increased from 435,895 to 465,895 post the acquisition.

QVE ended lower on the ASX today at AUD 1.035, with a fall of 0.48 per cent as compared to the last closed price.

Tribeca Global Natural Resources Limited (ASX:TGF) - On 17^th July 2019, the director of Tribeca Global Natural Resources, Craig Evans, acquired 16,070 ordinary shares via an on-market trade at a consideration of $35,376.51. The director now holds 76,869 ordinary shares of Tribeca Global Resources Pty Ltd post the acquisition.

Another director of the company, Benjamin Cleary, also acquired 16,070 ordinary shares via an on-market trade at a consideration of $35,376.51 on 17^th July 2019. The director also now holds 76,869 ordinary shares of Tribeca Global Resources Pty Ltd post the acquisition.

The stock of the company closed at AUD 2.180 on the ASX today.

Land & Homes Group Limited (ASX: LHM): On 15^th July 2019, the company’s director, Mr Choon Keng Kho indirectly acquired 5,750,000 Class A Convertible Notes at $0.02 to the amount of $115,000. Post the acquisition, the director holds 248,229,679 Class A Notes of Khosland Management Pte Ltd.

The company’s stock last traded on 27^th June 2019 at AUD 0.009.

Insider Selling Activities in Australia

Eneco Refresh Limited (ASX:ERG): The director of the company, Chiau Thuan TEH indirectly disposed off 34,000 ordinary shares at a consideration of $2,414 via an on-market trade on 15^th July 2019. The number of securities held by the director after change amount to 6,599,335.

ERG traded last on ASX on 15^th July 2019 at flat AUD 0.071.

ALE Property Group (ASX:LEP): Andrew Wilkinson, the company’s director, disposed off 33,365 Stapled Securities and also acquired 33,365 Stapled Securities at a consideration of $167,825.95 on 11^th July 2019 via an off-market trade to transfer securities between beneficial holders.

LEP’s stock closed in the red territory at AUD 5.120 today, down by 0.58 per cent in comparison to the last closed price.

Marley Spoon AG (ASX: MMM): On 4^th, 5^th and 10^th July, the company’s director, Fabian Siegel directly and indirectly disposed off 7,655,000 CDIs (whereof 4,835,000 were held by AKW Capital GmbH, 2,007,000 by Marley Spoon Series B UG & Co. KG and 813,000 by Marley Spoon Series A UG & Co. KG).

MMM ended the trading session flat at AUD 0.690 on ASX today.

Gulf Manganese Corporation Limited (ASX: GMC): Recently, the director of the company, Hamish Bohannan, directly and indirectly disposed off 11,694,407 fully paid ordinary shares at a consideration of $70,166.44 via an on-market trade. The director declared that the selling of shares is undertaken due to the tax obligations and personal financial reasons.

GMC’s shares closed higher on ASX today at AUD 0.007 with a rise of 16.66 per cent compared to previously closed price.

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