‘Ensuring fairness and trust’: tackling insider trading

This article was originally published by Cat Woods for LSJ Online (29 April 2025).

On 9 April, with the US share market in turmoil after his announcement of broad tariffs only a week earlier, President Donald Trump took to Truth Social to post: "THIS IS A GREAT TIME TO BUY!!! DJT.”

Hours later, at 1:18pm, he publicly announced a 90-day pause on tariffs, upon which stock markets boomed for the remainder of the trading day. Trump has been accused of insider trading and market manipulation by Democratic senators, with some calling for an investigation.

The S&P 500 rose 9.5 per cent, gaining back $US4 trillion it had lost over the previous four days according to Associated Press reporting, with Trump’s company (Trump Media and Technology Group) nearly doubling in value by the end of trading. Did Trump intend to provide a buying tip to followers of his Truth Social account for the market generally, or his own company, which rose 22.67 per cent, or $US415 million, by the end of the day’s trading? Elon Musk’s Tesla company also rose $20 billion over the trading day.

After the close of trading on 9 April, perhaps in defiance of potential insider trading accusations, Trump posted a video, shared by other users on X, of himself and two men (one identified as Charles Schwab of the eponymous financial firm) in the Oval Office of the White House, claiming:  “He made $2.5 billion today and he made $900 million — that’s not bad.”

White House spokesman Kush Desai implied that in a broader trade war with China, Trump was acting to “reassure the markets and Americans about their economic security in the face of nonstop media fear mongering.”

On April 10, Democratic Senators Ruben Gallego of Arizona and Adam Schiff of California penned a letter to the executive watchdog, the Office of Government Ethics, to “request an urgent inquiry into whether the President, his family, or other members of the administration engaged in insider trading or other illegal financial transactions.”

Sarah J. Williams, a Penn State Dickinson Law School professor, told US media that insider trading occurs “when individuals make stock trades using non-public information that came into their possession through a relationship of trust and confidence.”

Regardless of the push for investigation, a conviction depends on proof beyond reasonable doubt. Williams explained: “Proving that non-public information was used — as opposed to the use of analysis performed on publicly available information — and that it motivated the illegal trades can be challenging.”

When Australian politicians announce policy, or new Census and ABS data regarding housing, jobs, and spending, we typically see a swift market response in Australia.

Corporate and commercial lawyer Eric Kwan is special counsel at Sydney-based firm Bartier Perry.

He says, “The markets respond very quickly to public announcements, however the size of the response tends to be tempered by how much of this has already factored in through speculation.”

In the US, there are multiple reasons that any accusations are unlikely to result in legal action, or successful legal action, against Trump. Firstly, there is no evidence Trump gave any private information to individuals prior to posting on Truth Social. Secondly, Trump’s post on Truth Social was not solely accessible to his 9.4 million followers, but openly viewable. Additionally, the advice was so general as to be unclear in its exact intent: was he advising to buy any stock, or Trump’s own company stock, and did his post constitute advice at all? Further, Trump could argue he had not completely decided upon the tariffs pause at the time of posting, and therefore could not have provided insider information.

Ultimately, the White House has established greater administrative control. Presently, Trump is intimating that he has the power to remove the independent Chair of the Federal Reserve of the United States, Jerome Powell. Even if an investigation were carried out by the Securities and Exchange Commission and the Justice Department, both fall under the remit of the Trump administration.

In Australia, insider trading is both a criminal and a civil offence under the Corporations Act 2001 (Cth).

Insider trading must be proven beyond a reasonable doubt to qualify for the criminal offence, upon which the penalties are significant. In 2010, the penalties were increased so that for an individual, the maximum imprisonment is up to 10 years and/or a fine of $765,000 or three times the benefit gained (whichever is greater).

For the civil offence, insider trading needs to be proven on the balance of probabilities. The maximum penalty for an individual is $200,000.

Kwan says, “The laws around insider training were formally introduced into Australian corporate law back in 1991 and are aimed at ensuring fairness and trust in financial markets.  While the core framework does remain the same, the regime has been modified over time to respond to changes in the market and public expectation, and it is expected that it will continue to do so. It is however just that, a framework, that is intended to give some flexibility for more modern interpretation. The laws prohibiting insider trading in Australia are broad in their application carrying both civil and criminal penalties.”

Kwan points out that in November 2024, ASIC announced that its enforcement priorities for 2025 will include strengthening investigation and prosecution of insider trading, and that it will continue its enduring priority to target misconduct that damage market integrity such as insider trading.  In 2023 ASIC was recognised with an Australian Public Service (APS) Data Analytics and Visualization Award for its development of a suspected insider trading detection system, which helped strengthen its investigation processes and is aligned with its priorities.

Over the past four years, several prominent cases have highlighted ASIC’s detection and prosecution of insider trading.

Cameron Waugh made and forfeited $57,256.44 trading in Genesis Minerals, resulting in two years’ imprisonment in 2024; Kurt Schlosser made and forfeited $28,883.53 trading in Piedmont Lithium, and received two years and six months’ imprisonment in 2023; Michael Story made and forfeited $70,179.37 trading in Sigma Healthcare, resulting in 14 months’ imprisonment in 2020; and Gregory Campbell made and forfeited $31,996 trading in Pulse Health for 12 months’ imprisonment in 2021.

Along with monitoring the ASX, Iress, and news media, ASIC counts on the Market Analysis and Intelligence System, in which multiple dashboards show price and volume anomalies, real-time and historical trading data.

This information is backed up by advanced data analytics via Project Artemis, which identifies potential insider trading via the Auto Insider Detection Dashboard.

The Project Artemis dashboard matches the suspected perpetrators of anomalous trading behaviour with those who had access to confidential information. That may include their spouses, business colleagues and associates, others residing at the suspect’s residential and business addresses, shared trading accounts, and directorships.

These systems are highly dependent on AI to identify suspected inside traders, and in 2023, ASIC told an AFR journalist that there was approximately 300TB of data seized as part of ASIC’s investigations and about half of that was processed through ASIC’s systems.

The largest insider trading case occurred in March 2015 when Christopher Russell Hill, an employee of the Australian Bureau of Statistics (ABS), revealed yet-to-be-published, sensitive ABS data that he’d been privy to as a Commonwealth official. The friend he shared this information with, Lukas James Kamay, an employee of the National Australia Bank, used this knowledge to trade on the foreign exchange derivatives market over nine months. Hill repeatedly provided confidential data on employment figures, retail sales, building approvals, capital expenditure and housing finance.

On 10 and 11 December 2014 Kamay and Hill pleaded guilty in relation to their offending before Justice Hollingsworth in the Supreme Court of Victoria at Melbourne.

Kamay pleaded guilty to a total of seven charges, while Hill pleaded guilty to a total of six charges.

Commonwealth Director of Publication Prosecutions, Robert Bromwich SC said “Justice Elizabeth Hollingworth has made it clear that insider trading and other offences that undermine the integrity of the market are serious crimes warranting substantial gaol sentences.”

Both were sentenced, after reaping $7 million from their scheme, following a joint investigation by the AFP and ASIC. Kamay received seven years and three months imprisonment along with a permanent ban on providing financial services in Australia, while Hill was sentenced to three years and three months.

Kamay was convicted and sentenced in relation to four counts of insider trading contrary to section 1043A and 1311(1) of the Corporations Act 2001 (Cth); two counts of dealing in identification information using a carriage service contrary to section 372.1A of the Criminal Code (Cth); and one count of dealing in proceeds of crime $100,000AUD or more contrary to section 400.4(1) Criminal Code (Cth).

Hill was convicted and sentenced in relation to four counts of abuse of public office contrary to section 142.2(1) Criminal Code (Cth); one count of dealing in identification information using a carriage service contrary to section 372.1A Criminal Code (Cth); and one count of insider trading contrary to section 1043A and 1311(1) of the Corporations Act 2001 (Cth).

Whether there is public and political appetite for a crackdown on white collar crime is yet to be seen, both in the US and in Australia. ASIC has consistently called for greater funding to carry out investigations and enhance its detection technology. In late 2024, the Australian government introduced new laws changing how ASIC is funded, with regulated entities now receiving invoices for regulatory services wherein levies reflect the cost of regulating specific subsectors, with some being flat, graduated, or a combination. ASIC has been allocated additional funding for specific initiatives like fighting scams, promoting sustainable finance, and modernising digital assets regulation.