Corporations Act 2001

CHAPTER 7 - FINANCIAL SERVICES AND MARKETS  

Note: This Chapter applies to a CCIV in a modified form: see Division 4 of Part 8B.7 .

PART 7.10 - MARKET MISCONDUCT AND OTHER PROHIBITED CONDUCT RELATING TO FINANCIAL PRODUCTS AND FINANCIAL SERVICES  

Division 3 - The insider trading prohibitions  

Subdivision B - The prohibited conduct  

SECTION 1043L   A SPECIFIC SITUATION IN WHICH A COMPENSATION ORDER UNDER SECTION 1317HA MAY BE MADE  

1043L(1)   Situation to which this section applies.  

If:

(a) a person (the insider ) possesses information that is not generally available but, if the information were generally available, a reasonable person would expect it to have a material effect on the price or value of Division 3 financial products (other than derivatives); and

(b) the insider knows that, or is reckless as to whether:

(i) the information is not generally available; and

(ii) if the information were generally available, it might have a material effect on the price or value of those Division 3 financial products; and

(c) the insider (whether as principal or agent) in contravention of subsection 1043A(1) :

(i) applies for, acquires, or disposes of, or enters into an agreement to apply for, acquire, or dispose of, any such Division 3 financial products; or

(ii) procures another person to apply for, acquire, or dispose of, or to enter into an agreement to apply for, acquire, or dispose of, any such Division 3 financial products;

the following subsections apply.

1043L(2)   Compensation for damage suffered by person applying for the Division 3 financial products.  

If the insider applied for or agreed to apply for, or procured another person to apply for or to agree to apply for, the Division 3 financial products, the issuer of the products may, by action under section 1317HA , recover as compensation for damage suffered by the issuer, the amount (if any) by which the price described in the first of the following paragraphs was less than the price described in the second of those paragraphs:

(a) the price at which the products were applied for, or agreed to be applied for, by the insider or the other person;

(b) the price at which they would have been likely to have been disposed of in a disposal made at the time of the application or the time of the agreement, as the case may be, if the information had been generally available.

The action may be taken against the insider, the other person or any other person involved in the contravention.

1043L(3)   Compensation for damage suffered by person disposing of the Division 3 financial products.  

If the insider acquired or agreed to acquire, or procured another person to acquire or to agree to acquire, the Division 3 financial products from a person (in this subsection and subsection (5) called the disposer ) who did not possess the information, the disposer may, by action under section 1317HA , recover, as compensation for damage suffered by the disposer, the amount (if any) by which the price described in the first of the following paragraphs was less than the price described in the second of those paragraphs:

(a) the price at which the financial products were acquired, or agreed to be acquired, by the insider or the other person from the disposer;

(b) the price at which they would have been likely to have been acquired in an acquisition made at the time of the first-mentioned acquisition or the time of the agreement, as the case may be, if the information had been generally available.

The action may be taken against the insider, the other person or any other person involved in the contravention.

1043L(4)   Compensation for damage suffered by person acquiring the Division 3 financial products.  

If the insider disposed of or agreed to dispose of, or procured another person to dispose of or to agree to dispose of, the Division 3 financial products to a person (in this subsection and subsection (5) called the acquirer ) who did not possess the information, the acquirer may, by action under section 1317HA , recover, as compensation for damage suffered by the acquirer, the amount (if any) by which the price described in the first of the following paragraphs was greater than the price described in the second of those paragraphs:

(a) the price at which the financial products were disposed of, or agreed to be disposed of, by the insider or the other person to the acquirer;

(b) the price at which they would have been likely to have been disposed of in a disposal made at the time of the first-mentioned disposal or the time of the agreement, as the case may be, if the information had been generally available.

The action may be taken against the insider, the other person or any other person involved in the contravention.

1043L(5)   Additional situations in which issuer may recover.  

In addition to any action that may be brought as provided by subsection (3) or (4), the issuer of the financial products may, in the case of an acquisition or disposal of, or an agreement to acquire or dispose of, the financial products by the insider or another person in the circumstances mentioned in that subsection, by action under section 1317HA , recover, as compensation for damage suffered by the issuer:

(a) in the case of an acquisition or agreement to acquire the financial products - the amount (if any) by which the price described in the first of the following subparagraphs was less than the price described in the second of those subparagraphs:

(i) the price at which the financial products were acquired, or agreed to be acquired, by the insider or other person from the disposer;

(ii) the price at which they were likely to have been acquired in an acquisition made at the time of the first-mentioned acquisition or the time of the agreement, as the case may be, if the information had been generally available; or

(b) in the case of a disposal or an agreement to dispose of financial products - the amount (if any) by which the price described in the first of the following subparagraphs was greater than the price described in the second of those subparagraphs:

(i) the price at which the financial products were disposed of, or agreed to be disposed of, by the insider or other person to the acquirer;

(ii) the price at which they would have been likely to have been disposed of at the time of the first-mentioned disposal or the time of the agreement, as the case may be, if the information had been generally available.

The action may be taken against the insider, the other person or any other person involved in the contravention.

1043L(6)   ASIC may take action for benefit of issuer.  

ASIC may, if it considers that it is in the public interest to do so, bring an action in accordance with subsection (2) or (5) in the name of, and for the benefit of, an issuer of Division 3 financial products for the recovery of an amount that the issuer is entitled to recover by virtue of that subsection.

1043L(7)   Relief from liability.  

In an action brought against a person in accordance with this section because the person entered into, or procured another person to enter into, a transaction or agreement at a time when certain information was in the first-mentioned person's possession, the court may relieve the person wholly or partly from liability if it appears to the court that the information came into the first-mentioned person's possession solely as a result of the information having been made known as mentioned in subparagraph 1042C(1) (b)(i).

Special provision for registered schemes and notified foreign passport funds - treatment of amount recovered in respect of subsection (2) loss

1043L(8)    

If:

(a) the responsible entity for a registered scheme or the operator of a notified foreign passport fund; or

(b) ASIC in the name of, and for the benefit of, the responsible entity for a registered scheme or the operator of a notified foreign passport fund;

brings an action in accordance with subsection (2) in respect of a subscription for, or any agreement to subscribe for, any interests in the scheme or fund, any amount recovered in the action:

(c) is to be held:

(i) in the case of a registered scheme other than an Australian passport fund - by the responsible entity; and

(ii) in the case of an Australian passport fund or a notified foreign passport fund - by the responsible holding party for the fund;

on behalf of the persons who, at the time of the subscription or agreement, had rights or interests in the relevant financial or business undertaking or scheme, common enterprise, investment contract or time-sharing scheme; and

(d) is to be held on their behalf in the respective proportions that, at that time, their individual rights or interests bore to the total of all those rights or interests.

Special provision for registered schemes and notified foreign passport funds - treatment of amount recovered in respect of subsection (5) loss

1043L(9)    

If:

(a) the responsible entity for a registered scheme or the operator of a notified foreign passport fund; or

(b) ASIC in the name of, and for the benefit of, the responsible entity for a registered scheme or the operator of a notified foreign passport fund;

brings an action in accordance with subsection (5) in respect of an acquisition or disposal of, or an agreement to acquire or dispose of, interests in the scheme or fund, any amount recovered in the action:

(c) is to be held:

(i) in the case of a registered scheme other than an Australian passport fund - by the responsible entity; and

(ii) in the case of an Australian passport fund or a notified foreign passport fund - by the responsible holding party for the fund;

on behalf of the persons who, at the time of the disposal, acquisition or agreement, had rights or interests in the relevant financial or business undertaking or scheme, common enterprise, investment contract or time-sharing scheme; and

(d) is to be held on their behalf in the respective proportions that, at that time, their individual rights or interests bore to the total of all those rights or interests.

1043L(10)    
Any right of action that a person has by virtue of this section is in addition to any right that any other person has under section 1317HA .