Australian Institute of Criminology

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Casino capitalism? Insider trading in Australia / R Tomasic
Canberra : Australian Institute of Criminology, 1991
ISBN 0 642 15877 0
(Australian studies in law, crime and justice series) ; pp xiii-xiv

This book arose out of a research project which was begun in 1988 and which in many ways subsequently developed a life of its own as the project generated considerable media, professional and public interest. The phenomenon of insider trading continues to generate widespread attention, quite apart from the unfailing academic interest in this topic. Consequently, it has been difficult to provide a definitive or conclusive discussion of insider trading. However, most of the law enforcement and legal issues discussed in this book have remained fairly constant. At the same time, the law regarding insider trading continues to be tested in the courts and in the marketplace.

As this study illustrates, it is often extremely difficult to obtain a precise picture or interpretation of laws governing corporate and securities market conduct merely from an examination of the somewhat flimsy case law that has developed in this area. Much of this body of law has not been adequately tested in the courts so the law reports are a poor guide to understanding these laws. It is therefore necessary to look elsewhere for an understanding of the "law in action". This book draws heavily upon two main sources, apart from the limited case law on insider trading. These sources are the data derived from an empirical study of securities market participants and observers and the evidence presented to the House of Representatives inquiry into insider trading undertaken in 1989.

The empirical research with which this study began consciously sought to contribute to and influence the Australian policy debate concerning insider trading and its regulation. The research certainly generated a considerable amount of media and public attention. This had as much to do with the phenomenon of insider trading as with the particular research findings themselves. As this book goes to press, the Australian Federal Government's draft insider trading legislation has become the subject of further debate. This draft legislation is discussed in the final chapter of this book. No doubt this debate will continue for some time yet, regardless of whether new legislation is passed in 1991.

The first ten chapters of this book paint a picture of the nature and dimensions of insider trading and of the e ffectiveness of the law as a mechanism for insider trading control. This picture is unlikely to change dramatically for, ultimately, the criminal law is a less than adequate vehicle for controlling securities market abuses. Although this body of criminal law is a necessary supplement to informal mechanisms of social control in the securities industry, the effectiveness of the latter is of critical importance to the control of insider trading. The legacy of the 1980s has been a failure upon the part of the professions and the business community to restrain those of their peers who have been determined to take advantage of insider trading opportunities. Without such peer group control, insider trading law enforcement is unlikely to be credible.

Finally, some reference should be made to those who helped to make this book possible. Firstly, the completion of the initial empirical research project would not have been possible but for the generosity of those securities market practitioners who gave of their time and insights concerning insider trading. Secondly, the writing of this study would not have been possible without the unflagging support of my collaborator, Brendan Pentony. Brendan co-authored a series of articles which first reported the findings from this study. He was also a specialist adviser to the Griffiths Committee. He has chosen not to be a co-author of this book, although his contribution to it has been a significant one. Finally, it is appropriate to mention a number of others who have worked on different aspects of this project over the last few years. Ms Jann Lennard, BA, LLB, was the first research associate appointed to this project. Jann played an invaluable role in helping to set up the interviews of the survey participants and in transcribing the survey inter-view data. During the latter stages of the project, Mr Geoffrey Nicoll, BA, LLB, also provided invaluable research assistance as a Senior Research Officer of the Centre for National Corporate Law Research. Geoff assisted greatly in bringing together the final manuscript of this book. It is also appropriate to express appreciation to Ms Susan Quinn for her excellent work in typing and retyping the manuscript. Despite all this invaluable support, responsibility for all errors in this book must of course remain mine alone.

Roman Tomasic
March 1991