A Melbourne man has been sentenced to 14 months’ imprisonment for insider trading of ASX shares.
The County Court of Victoria on Monday handed down the sentence to former Sigma Healthcare Ltd (ASX: SIG) general manager Michael Story of Elwood, Victoria.
Story was also ordered to pay a fine of $30,000 and a penalty of $70,179.37, which was the level of benefit he illegally derived from insider trading.
The court found the executive sold his Sigma shares while he had information about the business that the public did not know about.
The insider information related to Sigma’s supplier relationship to giant pharmacy retailer Chemist Warehouse.
On 2 July 2018, Sigma announced to the ASX that its supply contract would cease on 30 June 2019. This significant loss of business led to the share price plunging 40% that day.
An Australian Securities and Investments Commission investigation found Story was “heavily involved” in the contract negotiations, and privately knew the deal wouldn’t be renewed.
He was also aware that the failure to renew the Chemist Warehouse relationship would have a massive impact on the Sigma stock price.
Despite knowing this, he sold 250,000 Sigma shares for $202,629.
ASIC deputy chair Sarah Court said Story was “a true insider” who had “sensitive company information” that would impact the share price.
“He sold his shares with inside information, giving him an unfair advantage,” she said.
“This criminal conduct threatens the integrity of Australia’s financial markets. ASIC will continue to pursue cases of using inside information to illegally trade on our markets.”
No other reason other than personal benefit
Judge Simon Moglia condemned Story’s dishonesty and found there was no explanation for his actions other than to avoid personal loss.
The former executive would have been sentenced to two years’ imprisonment if he had not pleaded guilty and instead contested the accusations.
Story was released upon a recognizance of $5,000 and a three-year good behaviour period.
At the time of Story’s offences, the maximum penalty for insider trading was 10 years’ jail. It is now 15 years.
The Commonwealth director of public prosecutions prosecuted the case against the former executive after an ASIC referral.
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