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



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3.2 Civil penalties

Civil penalties may also be imposed upon any person who violates market manipulation121 and other market misconduct provisions.122 Currently, such penalties may be imposed only under the civil penalty provisions.123 Put differently, the civil penalty provisions are now applicable to both the market misconduct and continuous disclosure provisions.124 Consequently, civil penalties may be brought against the offenders, either as financial services civil penalties or as corporation or scheme civil penalties.125

The ASIC is statutorily empowered to institute any relevant civil action against the offenders.126 For example, the ASIC may impose civil pecuniary penalties of up to Aus $200, 000 on individuals and Aus $1million on a body corporate, and the recovered money will be utilised to compensate all the prejudiced persons.127 It is noteworthy that these pecuniary penalties were recently increased to enhance the combating of market manipulation and similar practices in Australia.128 In addition, the ASIC may disqualify the perpetrators of market manipulation and other market misconduct offences from the management of any company or corporation for a certain period.129 The ASIC or the courts may declare (publicise) the existence of a violation, when satisfied that a particular person was involved in market manipulation or other related market misconduct offences.130 This publication is employed inter alia to discourage unscrupulous persons from engaging in market manipulation.131 The ASIC may further impose orders for civil penalties for punitive purposes against market manipulation offenders.132 Notably, the ASIC has a discretion regarding the actual amount to be imposed as punitive or pecuniary civil penalties against such offenders.133 In addition, further civil action against the offenders can be brought by the actual prejudiced person (a private right of action)134 and the relevant courts. For example, a court may, after it is satisfied that the contravention in question will materially prejudice the issuers of the financial products to which it relates,135 impose a civil compensatory action against the offenders to recover any damages incurred by the affected persons.136

The financial services civil penalties have relatively improved the enforcement of the market manipulation and other market misconduct provisions in Australia to date.137 Put differently, despite the fact that the lower standard of proof required in civil cases has not been quite utilised by both the ASIC and the courts to obtain settlements in market manipulation cases, the general enforcement of the market manipulation prohibition has been relatively successful in Australia.138

On the contrary, apart from the provisions of s 6D of the Financial Institutions (Protection of Funds) Act,139 the Financial Markets Act's market manipulation provisions do not expressly give rise to civil or administrative140 liability on the part of the offenders in spite of the fact that they are relatively comparable and commendable internationally,141 especially with regard to the nature and scope of their application.142 Consequently, it is hoped that South Africa will follow the example of Australia143 and other relevant jurisdictions on derivative civil penalties for market manipulation, to promptly introduce specific provisions for such penalties in the Financial Markets Act.144 In addition, apart from the provisions of s 6D of the Protection of Funds Act and the available common law remedies, it appears that the affected persons are not statutorily empowered to recover their losses through their own private civil litigation proceedings for market manipulation under the Financial Markets Act.145 Therefore, notwithstanding the fact that private persons do not have resources and investigatory powers similar to those of the FSB to institute the relevant actions against the offenders on their own, it is hoped that the Financial Markets Act will be amended in line with the position in Australia146 to provide a private right of action for the affected persons to claim their own civil or administrative damages directly from the market manipulation offenders. Moreover, in contrast to the Australian position,147 the civil remedies and civil penalties for market manipulation are not statutorily classified differently under the Financial Markets Act.148



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