How Statutory Civil Liability is Attributed to a Company: An Australian Perspective Focusing on Civil Liability for Insider Trading by Companies

Abstract

Where human servants of a company engage in insider trading activities in the course of their employment, the problem may arise as to, inter alia, the civil liability of the company. Questions on the ways in which the act and the knowledge of the person(s) who did the act and/or had the relevant knowledge may be attributed to the employing company will be at issue in determining the company S liability. This article makes an attempt to answer these questions. The article discusses the reasons why rules of agency will only have limited applications in insider trading liability attribution and how the tests that the Privy Council stipulated in Meridian Global Funds Management Asia Ltd v Securities Commission may assist in determining the company's general law and statutory liability for insider trading. The paper argues that it is possible to apply the doctrine of aggregation to combine the act of one servant and the knowledge of another for the purpose of establishing a company's civil liability for insider trading in Australia. It also contends that a company will not lose its memory where it acquires the relevant knowledge through a servant who ceases his or her employment after making relevant business decisions with the knowledge acquired, if the company innocently implemented the decisions after the departure of the servant.