CRIMINAL LIABILITY
All forms of market misconduct (including insider dealing)
and the new offences created by Division 4 are liable to
prosecution as a criminal offence under Part XIV of the
SFO. Previously insider dealing was subject only to civil
proceedings before the IDT. Some forms of market misconduct
were previously criminal offences under the SO and the CTO.
Penalties
The maximum criminal sanctions were increased by the SFO
to a maximum of 10 years' imprisonment and fines of up to
$10 million. Previously the maximum penalties under the
different ordinances were inconsistent. The court may also
impose disqualification, cold shoulder and disciplinary
referral orders. Failure to comply with a disqualification
or cold shoulder order is an offence liable to a maximum
fine of $1 million and up to 2 years' imprisonment.
No double jeopardy
A person will not be subject to the 'double jeopardy' of
both civil proceedings under Part XIII and criminal proceedings
under Part XIV for the same conduct. The SFO provides that
a person who has been subject to criminal proceedings under
Part XIV may not be subject to MMT proceedings if those
proceedings are still pending or if no further criminal
prosecution could be brought against that person again under
Part XIV in respect of the same conduct and vice versa (Sections
283 and 307).
The decision as to whether to take civil or criminal proceedings
in relation to suspected market misconduct is made by the
Secretary for Justice. The SFC may also institute summary
criminal proceedings before a magistrate for less serious
market misconduct offences, although the Secretary for Justice
is able to intervene in the SFC's conduct of any such proceedings.
The decision whether to take criminal or civil proceedings
is made in accordance with the Department of Justice's Prosecution
Policy which provides two criteria for the institution of
criminal proceedings: that there is sufficient evidence
for a criminal prosecution and that a criminal prosecution
is in the public interest. If these tests are not met, suspected
market misconduct will be dealt with through civil proceedings
before the MMT.
CIVIL LIABILITY – Private right of action
The SFO creates a private right of civil action in favour
of anyone who has suffered financial loss as a result of
market misconduct or any offence under Part XIV to seek
damages from the person who committed the market misconduct
or Part XIV offence. The perpetrator is liable to pay damages,
unless it is fair, just and reasonable that he should not
(Sections 281 and 305).
A person will be taken to have committed market misconduct
if:
-
he has perpetrated any market misconduct;
-
the market misconduct was perpetrated by a corporation
of which he is an officer with his consent or connivance;
or
-
any other person committed market misconduct and he
assisted or connived with that person in the perpetration
of the market misconduct, knowing that such conduct constitutes
or might constitute market misconduct.
It is not necessary for there to have been a finding of
market misconduct by the MMT or a criminal conviction under
Part XIV before bringing civil proceedings. Findings of
the MMT are however admissible in the civil proceedings
as prima facie evidence that the market misconduct took
place or that a person engaged in market misconduct. Further
a criminal conviction constitutes conclusive evidence that
the person committed the offence. The courts are able to
impose injunctions in addition to or in substitution for
damages.
Transactions not void or voidable
Sections 280 and 304 provide, as under the previous legislation,
that a transaction is not void or voidable by reason only
that it constitutes market misconduct or contravenes Part
XIV.
