In Australia’s “worst instance of insider trading to have come before the courts”, the Supreme Court of Victoria has come down hard on the young offenders Mr Kamay and Mr Hill, imposing record sentences of 7 years and 3 months and 3 years and 3 months respectively. Mr Kamay’s sentence is the longest sentence ever imposed for insider trading in Australia following the doubling of the maximum penalty from 5 years to 10 years in December 2010. The decision sends a clear message about the importance that Australia’s courts and law enforcement agencies place on protecting and maintaining market integrity.
Mr Kamay (an associate director on the National Australia Bank’s wholesale foreign exchange sales desk in Melbourne) and Mr Hill (a time series analyst at the Australian Bureau of Statistics) had an arrangement whereby:
- Mr Hill provided information about main economic indicators (MEIs) (which are important and highly confidential statistics relating to the state of the Australian economy and market) to Mr Kamay; and
- Mr Kamay used the MEI information to either buy or sell margin FX contracts (with some trades deliberately resulting in a loss to give the appearance of a normal trading pattern).
Mr Kamay, in fact, went beyond the $200,000 limit agreed with Mr Hill, and made a net profit of more than $7 million. Mr Hill only received $20,000 from the trading activities.
A joint investigation was launched by ASIC and the Australian Federal Police after a number of reports about possible illegal activity. Mr Kamay pleaded guilty to a number of charges including insider trading, identity theft and money laundering. Mr Hill also pleaded guilty to a number of charges including abuse of public office, insider trading and identity theft.
In relation to the insider trading charges, Hollingworth J in the Supreme Court of Australia found that:
- both Mr Kamay and Mr Hill knew that the MEI information was not generally available, and that if it were, a reasonable person would expect it to have a material effect on the price or value of that margin FX contracts that Mr Kamay entered into;
- insider trading is not a victimless crime and, in this case, apart from harm to the market and public confidence, there were also counterparties to each of the trades;
- Mr Kamay’s conduct of 45 transactions over 8 months was carefully planned and premeditated and he deliberately tried to conceal what he was doing by interspersing his gains with some losses;
- both men were motivated by “personal greed, pure and simple” and were not driven by gambling or other addiction, or some sort of financial pressure which may apply to moderate their moral culpability; and
- while both men were genuinely remorseful and their guilty pleas demonstrated a willingness to facilitate the course of justice, general deterrence had a central role to play largely because of the difficulty in detecting and investigating white collar crime, particularly insider trading.
Her Honour imposed the following record long sentences for insider trading:
- imprisonment for 3 years and 3 months (with a non-parole period of 2 years) for Mr Hill; and
- imprisonment for 7 years and 3 months (with a non-parole period of 4 and half years) for Mr Kamay.