The regulation of market manipulation in australia: a historical comparative perspective



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3 Available penalties and remedies

The Corporations Act extends civil penalties, civil remedies86 and criminal penalties to any person who violates its provisions on market manipulation.87



3.1 Criminal penalties

Any person who engages in market manipulation activities is liable for a criminal offence and penalty.88 The discretion to institute criminal proceedings rests primarily with the Commonwealth Director of Public Prosecutions (Commonwealth DPP). Nonetheless, the Australian Securities and Investments Commission (ASIC) may, after consultation with the Commonwealth DPP, bring criminal proceedings against any person accused of contravening the relevant market abuse provisions in Australia.89 Moreover, the prosecution of market manipulation and other market misconduct offences may be instituted within five years after the commission of the offence in question or at any time as stipulated by the Minister of Justice.90 Any person who engages in manipulation or other market misconduct offences91 will be liable for a maximum criminal penalty fine of Aus $22, 000 for individuals or Aus $110, 000 for a body corporate, or imprisonment for a period not exceeding five years, or both such fine and imprisonment.92 These penalties were recently increased by the Corporations Amendment (No 1) Act,93 to a maximum pecuniary fine of Aus $495, 000 or three times the profit gained or loss avoided, whichever is the greater,94 or ten years imprisonment,95 or both such fine and imprisonment, for individuals. The maximum criminal penalties for a body corporate were increased to a fine of Aus $4, 950, 000, or three times the profit made or loss avoided, or 10% of the body corporate's annual turnover during the relevant period in which the offence was committed, whichever is greater.96 This clearly suggests that market manipulation and other related market misconduct offences are all treated as criminal offences, as they carry the same penalty.97 In relation to this, the ASIC may further bring such criminal proceedings even after civil penalty proceedings for the same conduct have been instituted.98 However, where a person has been convicted of a criminal offence for the same conduct, no civil penalty action will be additionally instituted against such person.99

Likewise, as is the position under the Corporations Act in Australia,100 the Financial Markets Act provides criminal sanctions for market manipulation offences.101 Nonetheless, in contrast to the position in Australia,102 the Financial Markets Act's criminal penalties for market manipulation103 might be less deterrent, particularly with regard to some unscrupulous big business persons, or companies which may easily afford to pay the R50 million fine and commit other market manipulation offences in the future.104 In this regard it is hoped that the Financial Markets Act will be amended in line with the Australian position105 to introduce sufficient and more deterrent maximum criminal penalties for individuals106 and juristic persons,107 with much higher maximum penalties being imposed on such juristic persons.108 Like its Australian counterpart,109 the Director of Public Prosecutions (DPP) in South Africa has the main prerogative to institute criminal proceedings against the perpetrators of market manipulation.110 Furthermore, in South Africa the DPP may institute such proceedings only after referrals from the Financial Services Board (FSB).111 Nevertheless, unlike the situation in Australia,112 the Financial Markets Act does not specifically provide whether the FSB may, in addition to administrative proceedings,113 bring its own criminal proceedings against the market manipulation offenders without initially referring such proceedings to the DPP and the relevant courts in South Africa.114 It is important to note, however, that the enforcement of the criminal sanctions for market manipulation and other related offences has to some extent been impeded by the insurmountable difficulties relating to the high evidentiary burden of proof required in the prosecution of such offences in both South Africa115 and Australia.116 In addition, the implementation of the criminal sanctions for market manipulation has so far been relatively more successful in Australia117 than in South Africa.118 This could in part because of the considerable number of cases that have come before the courts in Australia.119 In contrast, relatively few cases involving market manipulation offences have been successfully investigated and prosecuted in South Africa to date.120



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