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Screenshot of a breaking news alert e-mail from Q2 2017
Australia’s financial markets regulator last year invested substantial resources in its real-time market surveillance operations by implementing automated systems which constantly assess the behavior of electronic trading firms which operate in Australia.
Subsequent to the installation of such systems, the Australian Securities and Investments Commission (ASIC) released its annual report on enforcement activity, within which the regulatory authority stated that it intended to take a very harsh stance on market abuse, with particular concentration on insider trading.
This was quite clearly not an empty promise, as Friday’s arrest by the Australian Federal Police (AFP) of two FX derivatives traders has demonstrated.
Australia has recently gained a reputation as being a very well organized, financially stable region in which to conduct FX business, which, combined with being located within close proximity to the Asia-Pacific region’s large potential client base, makes it an ideal region to establish an FX brokerage. The national authorities have recognized the need to protect this reputation and to safeguard Australia from malpractice, therefore it is clear that any transgressors will be severely punished.
By involving the Police, who arrested a 26-year-old man, an employee of the National Australia Bank (NAB), who was, according to ASIC, receiving sensitive information from a 24-year old man, an employee of the Australian Bureau of Statistics (ABS), Australia demonstrates that it considers this form of malpractice to be fitting of criminal prosecution rather than civil penalties.
The evidence which led to the arrests was provided by the Australian regulatory authorities’ surveillance systems, which include a proprietary system, accompanied by the Delta Stream system provided by British financial software company First Derivatives.
It will be alleged in court that the 26-year-old man was obtaining this market sensitive information before its official release by the ABS, then using it to enter into foreign exchange derivative products and personally profit from favorable movements in the prices of those derivatives.
This trading activity, occurring between August 2013 and May 2014, has resulted in profits of approximately $7 million. This has been restrained by the AFP-led Criminal Assets Confiscation Taskforce under Commonwealth proceeds of crime legislation.
Earlier on Friday, the AFP and ASIC executed eight search warrants in Melbourne and Canberra, arresting the 26-year-old Clifton Hill man and the 24-year-old Belconnen man.
The 26-year-old Clifton Hill man has been charged with a range of offences relating to the use of inside information from ABS to unlawfully profit through the trading of foreign exchange derivatives and corrupting a public official.
The 24-year-old man from Belconnen has been charged with offences relating to insider trading, receiving a corrupt benefit, release of sensitive information, and abuse of public office.
Items seized during the search warrants include $9,000 in cash.
The 26-year-old Clifton Hill man was charged with the following offences:
One count of conspiracy to engage in insider trading, pursuant to section 11.5 of the Criminal Code Act 1995, which is an offence by virtue of section 1311(1) of the Corporations Act 2001 (Corporations Act) in that they contravened section 1043A(1)(c) of the Corporations Act.
One count of giving a bribe to a Commonwealth public official, with the intention to influence the official in the exercise of his duties as a Commonwealth public official, contrary to section 141.1(1)(a)(iii) of the Criminal Code Act 1995 (Cth) (Criminal Code Act)
Three counts of insider trading, by trading in foreign exchange derivatives while in possession of inside information not generally available to the public, contrary to sections 1043A(1)(c) and 1311(1) of the Corporations Act
One count of dealing in identification information using a carriage service and dealing with that identification information, with the intention to use the identification information to pretend to be or to pass themselves off as another person for the purpose of facilitating the commission of an offence, contrary to section 372.1A(1) of the Criminal Code Act.
One count of dealing in proceeds of crime, money or property worth AU $1,000,000 or more, contrary to section 400.3(1) of the Criminal Code Act.
The 24-year-old Belconnen man was charged with the following offences:
One count of conspiracy to engage in insider trading, pursuant to section 11.5 of the Criminal Code Act 1995, which is an offence by virtue of section 1311(1) of the Corporations Act in that they contravened section 1043A(1)(c) of the Corporations Act.
One count of receiving a bribe as a Commonwealth public official, contrary to section 141.1(3)(a)(iii) of the Criminal Code Act
One count of abuse of public office to dishonestly obtain a benefit, contrary to section 142.2(1)(b)(i) of the Criminal Code Act
One count of dealing in proceeds of crime, money or property worth $10,000 or more, contrary to section 400.6(1) of the Criminal Code Act.
Both suspects are scheduled to appear in Magistrates Court, the first in Melbourne, the latter in Canberra.
ASIC has confirmed that the NAB and the ABS provided their full cooperation and assistance to police throughout the investigation.
AFP Acting National Manager Crime Operations Ian McCartney made a public statement on friday that this action sends a strong message to those engaging in this type of criminal activity.
“The AFP and ASIC have worked together closely on this serious and complex investigation, utilising the resources and expertise of both agencies to bring about today’s arrests” Acting Assistant Commissioner McCartney said. “The assistance of the NAB and ABS in this matter was invaluable and has greatly contributed to the successful actions of the AFP and ASIC today.”
“Investigations like this send a clear message to anyone who is thinking of engaging in this type of criminal activity – we have the ability to monitor you and take action, as we’ve done today” he concluded.
ASIC’s head of markets enforcement Chris Savundra said ASIC is dedicated to taking strong enforcement action against insider trading.
“Insider trading is a serious criminal offence which will not be tolerated because it has the potential to destroy trust, discourage participation, and undermine confidence in the integrity of Australia’s financial markets,” Mr Savundra said.
“We reiterate that the outcome of today’s operation is a testament to the close working relationship and cooperation between the AFP and ASIC, and the dedication and expertise of the teams involved.”
The full release from ASIC can be viewed here.