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Case I: Insider trading

Mr H accessed the ABS database and copied highly confidential, embargoed information on employment, trade and retail figures.

He passed the information to Mr K, a banker and university friend of Mr H, before it was released to the market. Mr K used the data to trade on currency markets based on the direction of the Australian dollar.

The pair set up the scheme in 2013 with the aim of making $200,000 profit in a year to split between them. However, Mr K deceived Mr H about how much money he was making, setting up secret trading accounts without telling Mr H. Mr K eventually made more than $7.2 million. Mr H received just $19,500.00 from the ventures, much of which was later seized by police.

The scheme set up by Mr K and Mr H was not discovered until the Australian Securities Investment Commission was alerted by a foreign exchange contract provider concerned about suspected insider trading.

In sentencing the two men, the judge commented that they were motivated by personal greed. She also noted that before the time of the offences Mr H had separated from his long term girlfriend, had moved to Canberra away from his family support, had been depressed, and was drinking heavily.

Lessons

  • There are limits to what can be prevented by integrity measures—insiders who know an organisation's procedures will often have an edge in circumventing those procedures.
  • Even so, there may be behavioural red flags that can help identify 'at risk' individuals, particularly if they have access to material like sensitive market information.