Making the most of a lost opportunity : do civil penalty proceedings for insider trading need to be reformed?

Insider trading is one of the most complex areas of corporate law, and insider trading laws appear to be among the most difficult to enforce. For this reason, civil penalty proceedings for insider trading were introduced in 2002 as part of the Financial Services Reform amendments to the Corporations Act 2001 (Cth). At that time, it was considered that the availability of civil penalty proceedings for insider trading would aid in remedying enforcement difficulties and provide the Australian Securities and Investments Commission with more effective, alternative means to pursue insider traders. However, since that time, only three sets of civil penalty proceedings for insider trading have been undertaken: Australian Securities and Investments Commission v Petsas; Australian Securities and Investments Commission v Citigroup Global Markets Australia Pty Ltd [No 4]; and Australian Securities and Investments Commission v Hochtief Aktiengesellschaft. This article aims to identify why there have been so few civil penalty proceedings for insider trading and considers the impact of the fault element of insider trading, the comparatively low civil penalties, and the need for appropriate deterrence, as well as the relevance of the decision in Australian Securities and Investments Commission v Whitebox Trading Pty Ltd in relation to civil penalty proceedings, in order to determine whether reform is needed in this area.