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

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3.3 Civil remedies

Civil remedies are also available to all the persons prejudiced by market manipulation149 and other related market misconduct offences.150 For instance, the ASIC may institute civil compensation orders against any person who contravenes the market manipulation and other market misconduct provisions.151 The ASIC has further discretion and authority to determine the actual appropriate civil compensatory remedies that will be granted to any persons affected by market manipulation and other related offences.152

In addition, a private right of action is expressly provided for any persons who incurred losses as a result of market manipulation and other market misconduct violations by way of application for a compensation order.153 This enables the affected persons to claim their civil compensatory damages timeously and directly from the perpetrators of market manipulation and other related offences.154 As stated earlier,155 the relevant courts or the ASIC may make a declaration that certain conduct constituted a market manipulation violation.156 Importantly, the ASIC or any other applicant in a civil action for remedies may rely on such a declaration without being required to further prove the actual occurrence of market manipulation or other related contravention in question.157 A declaration of the contravention of market manipulation or other market misconduct provisions is therefore a useful tool to expedite actions for civil remedies by both the courts and the ASIC.158

Furthermore, the ASIC may seek civil or administrative freezing orders or injunctions from the courts against the perpetrators of market manipulation and other market misconduct offences.159 This remedy is, among other things, aimed at directly preventing or stopping the offenders from continuing with a particular illicit conduct or their market manipulation and market misconduct violations.160 In addition, the ASIC or the Australian Securities Exchange (ASX) may take disciplinary action against a market participant or any person who committed market manipulation and other related offences. In essence, this implies that such matters will be brought to the ASX Disciplinary Tribunal, which will then decide on the appropriate civil remedy to be imposed against such offenders.161

Any prejudiced person or the ASIC162 may seek banning orders or disqualification orders from the courts against those who violate market manipulation or other market misconduct provisions.163 Notably, the banning or disqualification orders may be implemented against the offenders permanently or for a specified period.164 Therefore, the courts and the ASIC have discretionary powers to determine the exact period under which the accused persons will be banned or disqualified from executing their managerial duties in the affected corporations.165 Moreover, any person who can show or prove that he suffered a loss as a result of the contravention of continuous disclosure provisions will recover his damages from the offenders concerned.166

In a nutshell, although it may be argued that the civil remedies are at the bottom of the Australian securities law enforcement pyramid, which has civil penalties in the middle and criminal penalties at the top, such remedies have to date relatively enhanced the general combating of market manipulation and other related offences in Australia.167

On the other hand, as stated above,168 apart from the available common law remedies and the provisions of s 6D of the Protection of Funds Act, the Financial Markets Act does not have specific civil remedies for market manipulation.169 This could imply that the Financial Markets Act treats and interprets market manipulation simply as a wrong against the financial markets rather than as a wrong against all the affected persons.170 This may further suggest that its market manipulation prohibition is directed only at the public good and not necessarily at the individual or affected person's protection.171 It is argued, however, that such affected persons are not statutorily precluded from seeking their own additional civil remedies, apart from private rights of action, directly from the market manipulation offenders through the provisions of the Protection of Funds Act172 or any other relevant legislation. In addition, unlike the situation in Australia,173 no provision was made in the Financial Markets Act for the competent courts or the FSB to make a declaration of contravention of the market manipulation provisions whenever such contravention occurs.174 As a result, the preventive and deterrent effect attached to the declaration of contravention by the courts in Australia is obviously absent in South Africa.175 Moreover, in contrast to the position in Australia,176 and as already stated above, apart from relying on the relevant provisions of the Protection of Funds Act,177 the EC may seek an administrative compensatory monetary remedy payable to the FSB for later reimbursement to the affected persons only with regard to insider trading violations under section 82 of the Financial Markets Act.178

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