Room for improvement : insider trading and Chinese walls

The "Chinese wall" defence allows companies to avoid liability for insider trading which might otherwise be attributed from provisions of the Corporations Act 2001 (Cth) which deem a company to possess certain knowledge or information known to its officers. In Australia, the Chinese wall defence to insider trading has received little judicial attention, having only been considered in the case of Australian Securities and Investment Commission v Citigroup Global Markets (Australia) Pty Ltd (2007) 160 FCR 35. Whilst the aim of the prohibition on insider trading is to preserve market integrity, efficiency and investor confidence, this article will argue that the Chinese wall defence is too vague, uncertain and untested to provide sufficient clarity for these purposes. Further, this article will propose that additional regulatory guidance be given in respect of the requirements for an effective Chinese wall, so that appropriate legal protections can be provided, and to achieve the legislative aims and intentions underlying the prohibition on insider trading.