The information possessed by the offender as a result of his employment concerning the proposed trading intentions of Orion was not generally available and the offender knew the information was not generally available.
The information was not readily observable and did not consist of deductions, conclusions or inferences made or drawn from information that was readily observable.
The information had not been made known in a manner that would, or would be likely to bring it to the attention of persons who commonly invested in securities, of a kind whose price might be affected by the information, (and it did not consist of deductions, conclusions or inferences made or drawn from information so made known).
If the information was generally available a reasonable person would expect it to have a material effect on the price or value of the shares and their derivatives including the CFDs as traded by the offender.
The offender knew that if the information were generally available it would be expected to have a material effect on the price or value of the shares and their derivatives including CFDs."
10 On Tuesday 20 January 2009 the offender, through his lawyer, contacted ASIC wishing to fully cooperate in relation to the matters now before the Court. The offender initially requested an interview with ASIC prior to any notification of an investigation.
11 On Wednesday 21 January 2009, the offender voluntarily attended the Australian Securities and Investment Commission and indicated that he wished to fully cooperate and assist ASIC with any of its inquiries in relation to his conduct while at Orion. The offender has continued to assist ASIC from this time.
12 The offender voluntarily participated in a record of interview. During the interview the offender made a number of admissions as to his conduct concerning the matters now before the Court.
13 The offender admitted that he had signed a personal trading policy document which referred to insider trading. When he was asked what his understanding of insider trading was, he replied "It could be news about a company or it could be news about a large amount of stock that needs to be bought or sold".
14 When asked about his conduct at Orion and connection with his IG Markets account, the offender made admissions to placing orders through his IG Markets account and then trading on behalf of Orion. The offender at one point said:
"(a) For example I could buy a stock, Orion could then buy a stock and then I could sell the stock that I had bought previously … and
(b) If I saw that Orion needed to trade in a stock and that may have material impact on the price of the stock, then I would trade for myself personally and then trade out of the position when I thought it was appropriate for my personal best interests".
15 The offender admitted that he used the computer at Orion to place orders in his personal IG Markets account via the internet. The offender also said "For my trading, for my trading in Australian CFD shares I only used the computer at Orion because I only - I wouldn't want to trade in a stock unless I knew - unless I was at work, to be able to have knowledge of Orion's trades".
16 The offender possessed information relating to his role as an equities dealer at Orion. The information was that Orion intended to purchase or sell a large number of particular shares on the Australian Securities Exchange and that the offender would control the conduct and monitor that order ("the inside information").
17 The offender while possessing inside information concerning the proposed trading intentions of Orion in a particular security, would open CFD contracts in that security on his personal account. The value of the opening CFD reflecting the underlying share price of the security prior to Orion trading in the security.
18 The offender would then carry out the Orion trading strategy by placing orders to buy or sell the security. The offender not only knew the quantity and direction, (sell or buy) of the shares to be traded, but he knew how much of the order was completed or outstanding at any point in time.
19 The offender would then "close out" his CFD position by placing opposing trade on his personal account. The offender sought but did not always dispose of the CFDs towards the end of Orion's trading activity. Insofar as he was able to do so, this had the effect of maximising his profit and providing him with a known price at a given time.
20 When the offender participated in the interview on 21 January 2009 he was also questioned about the communication of inside information to Mr Oliver Peter Curtis.
21 During the interview the offender made admissions to passing inside information obtained during the course of his employment at Orion to Mr Curtis. The offender communicated this inside information for the purpose of Mr Curtis using the information to acquire and there after dispose of Division 3 financial products, namely CFDs.
22 Mr Curtis is a childhood friend of the offender, the offender and Mr Curtis have known each other since about 1998. The offender communicated the inside information to Mr Curtis during the period 23 May 2007 and June 2008. During this time the offender considered that he and Mr Curtis were best friends and were also working in the same industry.
23 Some time after the offender commenced working at Orion he talked to Mr Curtis in general terms about what the offender did at Orion including that he traded in large volumes of stock on behalf of Orion and how that trading moved the market price of the stock.
24 Over time, the offender and Mr Curtis discussed the idea of Mr Curtis trading in CFDs using inside information possessed by the offender about Orion's intended trading in the shares of entities listed on the Australian Securities Exchange.
25 In his role as a securities dealer for Orion the offender would receive instructions to trade in certain equities. These instructions would include what securities to trade in, whether to acquire or dispose of the securities and at what volume. Once in possession of this inside information the offender would send a message via the mobile phone to Mr Curtis about what security to take out a CFD position in, whether to go long or short and how many CFDs to acquire.
26 During the interview, the offender disclosed that he and Mr Curtis communicated with each other about Mr Curtis's trading in CFDs by using Blackberry mobile phones, both of which had been purchased by Mr Curtis. The offender later provided his Blackberry to ASIC. The purpose of communicating using the Blackberry was so the offender and Mr Curtis could use a method of transmitting messages that did not leave data on telecommunication services.
27 When asked about the use of the Blackberry phone in this way the offender explained:
"I was told that there had been a case in the - this sort of activity that it is common - a lot of people in the market would say is quite common. He had been - he wanted to be careful that there was never SMSs or phone calls from one another so that if he was to get asked "how were you trading so successfully?" he could say "I'm a good trader" and not that "I'm getting information from someone".
28 After the first text message from the offender, Mr Curtis would normally respond with a message to the effect that he had traded in CFDs, had partially traded in CFDs or was unable to trade. In this regard Mr Curtis would send messages like "can't do it", "done" or "unfinished".
29 Mr Curtis would send this message so that the offender would know when to start trading on behalf of Orion in the shares in which Mr Curtis had taken out a CFD position. By this communication Mr Curtis would confirm with the offender that he had taken out, for example, a long CFD position in a certain entity, before the offender started acquiring shares in that entity, knowing that the acquisition would raise the price of the shares in the entity.
30 During the period in which the offender was conducting the share trading on behalf of Orion, the offender and Mr Curtis would sometimes send messages to each other like, "wow the price is going up". Once the offender was sure that his trading on behalf of Orion was nearing completion he would send Mr Curtis another message in words to the effect of "sell X", "get out of X", X being the entity in which Mr Curtis was presently holding CFDs. On a few occasions when the offender knew that Orion would continue to trade in the shares of an entity into the next day he would message Mr Curtis words to the effect, "we are holding tonight".
31 The offender and Mr Curtis agreed to this system of messaging by Blackberry in order to coordinate the taking up of a CFD position by Mr Curtis before the offender commenced trading in the shares in the same entity. This was done in order to maximise the likelihood that the share price would move in the same direction as the CFD taken out by Mr Curtis.
32 At the time of communicating the inside information to Mr Curtis, the offender knew or ought reasonably to have known, that Mr Curtis would apply for, acquire or dispose of CFDs using the information provided by the offender to Mr Curtis.
33 The offender was asked during the interview if Mr Curtis knew the information was from Orion and the offender said "yes". The offender was asked if Mr Curtis knew the information was confidential and again the offender said "yes".
34 The offender has no prior convictions.
35 He has informed the Australian Securities that he has a past history of severe gambling addictions and both prior to and during the commission of the offences, lost substantial sums of money as a consequence of his gambling at the Sydney Casino and with bookmakers. During the period over which the offences were committed he sustained substantial losses in lawful trades on the ASXIndex. The offences were committed between June 2007 and January 2009.
36 The offender is now aged twenty-five. He was educated at St Ignatius College and studied economics at Sydney University. During the course of his degree he was approached by Orion and gained employment as an equities dealer. As I have explained, in that role he was required to trade on behalf of his employer, placing buy and sell orders as required by senior members of the firm. The offender's discretion was confined to choosing which broker to place the order with and the timing of the placement of that order. Although a responsible job, his task was the equivalent of a purchasing officer in many other areas of employment.
37 Evidence was tendered from psychiatrists which indicated that the offender is likely to have suffered from depression since he was in Year 12 at high school. That depression may have been triggered by the onset of a serious bipolar illness in his brother. His father, who gave evidence, indicated that from about that time his son became withdrawn, ceased to participate in the range of school activities which he had previously engaged in, and commenced a pattern of behaviour of which his father did not entirely approve. While studying full-time he obtained employment as a bookmaker's penciller and began to gamble on his own account. It is apparent that he now has a serious gambling problem. It would seem that the "thrill" of his illegal trades was similar to the thrill he received from a gamble on a horse or a play at the casino. His need for a "thrill" may be related to his psychiatric problems to which I have referred again below. In part his behaviour may be explained by those problems but it cannot be excused.
38 The offender gave evidence before me. He regrets his offending and the hurt he has occasioned to his family and others. He has undergone counselling for his addiction but it is apparent that it has not been successful and he has recently returned to gambling. He has done so in circumstances where his father has provided him with access to a credit card. He has gambled into debts in the order of $70,000 without the authority of his father and without his father being aware of his activities. This, like the offences which he has committed, is a breach of trust - on this occasion the trust of his father.
39 Upon the offences being detected the offender made a full confession and provided ASIC with the information in relation to the tipping offences which ASIC accepts would never have been available to be discovered. Accordingly, for those offences the Crown accepts that the offender is entitled to a discount of the type discussed in the R v Ellis (1986) 6 NSWLR 603. I determine the appropriate discount to be 10 per cent.
40 Following detection of his offending, the offender suffered a major depressive episode which required his hospitalisation. He had suicidal ideation. His medical condition was retrieved by anti-depressant medication which he continues to receive. Evidence was given by the tender of reports from the treating psychiatrist Dr Wilson and the consultant Dr Phillips. I have considered those reports carefully.
41 It is apparent that the offender will continue to require treatment for his depression although whether his condition will improve once the trauma of the discovery of his crimes and the sentencing process have passed is unknown.
42 It would seen that he has suffered a return of adverse symptoms in recent weeks as the sentencing hearing approached. That is not surprising. But the evidence does not persuade me, that given the nature of the offences, the offender should not receive a term of imprisonment. His counsel accepts that position. However, I will reflect his psychiatric difficulties by fixing sentences which I believe to be the minimum appropriate in all of the circumstances.
43 The Crown accepts that the offender is entitled to the maximum discount of 25% for his plea of guilty which demonstrates a willingness to facilitate the course of justice. He entered his pleas at the first available opportunity. The offender has also indicated that he is prepared to give evidence against another person being the person to whom he gave information. He is entitled to a further discount in that regard. That discount, which I determined to be 10%, is of course dependent upon the evidence being given in other proceedings. I shall provide that discount for the sentence for the tipping offences to which his offer to give evidence relates.
44 The offender engaged continuously in serious criminal conduct over a period of about nineteen months. His offences were serious. His conduct was both in breach of the law and contrary to his obligations to his employer. He was aware of those obligations which had been communicated to him in writing. Furthermore, he had responded to questions from his employer asking whether he was trading on his own account by lying and falsely stating that he was not trading.
45 It must be remembered that his crimes were not victimless. Each illegal transaction was likely to have a cost to someone, who either traded or held their position, without the benefit of the knowledge available to the offender. The offender set about systematically trading in breach of the law for the sole purpose of enhancing his personal wealth at the expense of others. The evidence which I accept indicates that the insider trading charges alone made him a total profit in excess of $1.9 million.
46 The Courts have said on many occasions that general deterrence is of particular significance in relation to white collar crime. This is particularly the case in relation to insider trading offences which by their nature are easy to perpetrate but difficult to identify. Whereas in the present case the course of offending conduct results in the commission of multiple offences, a sentence of imprisonment is inevitable. I appreciate that the trades which the offender was making were not made in conventional markets but I do not accept that as a consequence the need for general deterrence is diminished.
47 Although the offender has suffered from psychiatric difficulties the need for a sentence which reflects general deterrence is such that his psychiatric illness is of only limited significance in the present case. There can be no doubt that notwithstanding any illness he may have been suffering from he knew that what he was doing was wrong and a breach of the law.
48 But for his recent lapses and dishonest conduct in relation to his father, I may have concluded that the offender had good prospects of rehabilitation. However, although it is unlikely that he would ever again secure employment in a position where he was able to trade with inside information in the financial markets, his recent behaviour does not lead me to have confidence that he will be able to live a life without dishonest dealings with others to his own advantage. Unless he comes to terms with and ceases gambling the temptations to dishonest conduct may prove again irresistible.
49 I accept that in part the offender's conduct was affected by his immaturity. When his father gave evidence he described a world in which his son was employed as "plastic." This seems to me to be an appropriate description. The offender was paid a total of $350,000 in salary and bonuses in his last year in employment for carrying out work which could be appropriately described as a responsible clerical position. It is plain from the offender's evidence that the world into which he entered while still at the university corrupted his values, and given his predisposition to gamble, resulted in the offender pursuing the "high life" without regard for whether or not he was committing criminal offences.
50 Overseas holidays and gambling trips to Las Vegas and other casinos, together with an expensive luxury motor vehicle, became part of his life. In recent years the world of financial markets has come under increasing scrutiny and criticism. Paying $350,000 to a recent graduate in his early twenties carrying out a task of modest responsibility underlines the extent to which the values which underpin our society can be compromised. The values of productive endeavour and integrity in dealings and business can easily be lost. This is what happened in the case of the offender.
51 As it happened, the offender, a person of immature years, was allowed access to market information without effective supervision in a world where the remuneration paid to him bore no relationship to the remuneration paid to young employees outside the financial markets. The offender's employer, and others in the financial markets industry, have a responsibility to ensure that investors can rely on the integrity of the dealers in the market. I do not know how this can best be achieved, however, appropriate controls and audit requirements with personal supervision must be put in place and maintained. The temptations are so great and the potential rewards so significant that the fall into criminality of individuals is a significant risk.
52 The offender has not previously come to the notice of the authorities and he is entitled to the benefit of his good character. However, as has previously been said, those that commit white collar crime often have blameless records. Since his detection the offender has not worked and has returned to life at home with his partners. Encouraged by his family he has involved himself in significant work within a Catholic charitable organisation. He is to be commended for the efforts which he has made and which may have, but for his recent abuse of his father's trust, have suggested that he has good prospects of rehabilitation. He has paid $1.59 million pursuant to orders made by consent under the Proceeds of Crime Act 2002 (Cth). However s 320(b) of the Act indicate that this fact is not relevant to the sentence. I am in no doubt that his illegal gains would have been greater than this amount and they could have been greater by a significant margin.
53 As I have indicated, the offender's father gave evidence. He is a professional man. It is obvious that both he and his wife are immensely distressed by their son's behaviour. That is plainly understandable. They have six children, one of whom, as I have indicated, suffers from a serious bipolar disorder. I appreciate the tragedy which the offender's behaviour has brought to the family. The parents, and indeed the offender's siblings, have indicated their willingness to continue to support him and I have no doubt that this will occur.
54 I have decided that the offender must serve a period of full-time custody but I am sure that on his release he will receive whatever support the family are able to give him. However, whatever family support the offender may have now and in the future, unless he faces up to and deals with the issues in his life which have brought him to this point, he may never take his place as a responsible member of the community. Anyone who is the parent of children could not but appreciate the tragedy the offender's behaviour represents to the family. Only he can make amends once he is released from custody.
55 Father Sinn gave evidence of the offender's involvement in charity work. Father Sinn has been greatly impressed by the offender and believes that the events which have occurred have the potential to make the offender a far more worthwhile member of the community. I have no doubt that all those related to and friendly with the offender trust that Father Sinn's assessment of the situation will become the reality. Other persons provided testimonials which confirmed the commitment which the offender has made to charity work since his offending was discovered.
56 Both the Crown and the offender's counsel accept that for the purposes of sentencing the insider trading offences should be grouped and one sentence imposed. It is accepted that a separate sentence should be imposed for the tipping offences. Given the number of individual offences, and the lengthy period of offending, this is a significant concession by the Crown. The parties accept that the s 16BA schedule offences in relation to the insider trading offences should be considered in relation to count 1 and for the tipping offences in relation to count 20 I propose to take this course although I will provide some concurrency of the sentences it will be limited.
57 The sentences I propose compared with the extensive criminality of the offender may, to some people, seem to be lenient. This is in large part due to the Crown's concession that I should consider the offences as two sets of offences reflecting the two statutory provisions which were breached and assume a total maximum penalty of ten years imprisonment, being five years for each set.
58 Furthermore, although the offender must be adequately punished and others deterred, I am mindful of his relative youth, psychiatric illness and the possibility, notwithstanding my reservations, of his future rehabilitation.
59 In all the circumstances I have decided that the sentence which I impose for the insider trading offences should be discounted by a total of 25%, the discount for the tipping offences will be 45%. The latter includes a discount of 10% conditional upon the offender giving evidence in the contemplated proceedings against the alleged co-offender and also includes the Ellis discount.
60 Mr Hartman, would you please stand.