ASic spots insider trading before takeover

In Commonwealth Director of Public Prosecutions v Stewart (2025) VCC 1306, the County Court of Victoria dealt with a high-profile prosecution for criminal insider trading arising from share trading linked to a confidential takeover of Kidman Resources Limited. The case clarified key aspects of insider trading liability under Australian corporate law and reinforced the seriousness with which courts treat unauthorised trading on price-sensitive information.

Background

In April 2019, confidential negotiations took place around a proposed takeover of Kidman Resources Ltd by Wesfarmers Ltd. Information about the potential acquisition, which was not publicly disclosed at the time, was capable of materially affecting Kidman’s share price once made public.

Australian markets rely on equal access to price-sensitive information; trading while in possession of such information gives unfair advantage to those who hold it and undermines market integrity.

Insider Trading Conduct

On 3 and 10 April 2019, Duncan John Stewart, of Armadale, Victoria, purchased Kidman Resources shares with a total value of approximately A$130,635.87 while in possession of confidential information about the Wesfarmers proposal that was not generally available to the market.

Once Wesfarmers’ takeover bid was publicly announced on 2 May 2019, the Kidman share price rose, and Stewart sold his holdings, realising a profit of approximately A$64,975.48 from those trades.

Investigators also established that Stewart had knowledge of a separate earlier confidential takeover approach by Chilean mining company Sociedad Química y Minera de Chile (SQM) in March 2019 and that he encouraged a family member to acquire Kidman shares based on that information. That conduct was not charged as a separate offence but was taken into account at sentencing.

Legal Framework

Stewart pleaded guilty on 22 August 2024 to a criminal offence under section 1043A(1) of the Corporations Act 2001 (Cth) - the principal insider trading offence in Australian law. This provision makes it an offence to deal in financial products while in possession of “inside information” that is not generally available and that a reasonable person would expect to have a material effect on the price of the financial products if it were made public.

The matter was prosecuted by the Commonwealth Director of Public Prosecutions (Cth) after a referral from the Australian Securities and Investments Commission (ASIC) as part of its market-integrity enforcement program.

Outcome

On 15 September 2025, the County Court of Victoria, presided over by Judge Manova, sentenced Stewart to 18 months’ imprisonment, suspended immediately upon entering into a recognisance (good behaviour bond) of A$10,000 for two years, and ordered him to pay a pecuniary penalty equal to the profit realised — A$64,975.48.

Stewart is to be released immediately upon entering the recognisance and complying with its conditions. The court emphasised that insider trading “strikes at the core of market integrity” by allowing one participant to trade on unequal informational footing, undermining confidence in the fairness and transparency of Australian securities markets.

In the sentencing remarks, Her Honour noted that had Stewart not pleaded guilty at an early stage, a longer custodial sentence would have been imposed.

Regulatory Context

ASIC Deputy Chair Sarah Court reiterated that insider trading is a serious corporate crime and that criminal prosecution with imprisonment, financial penalties, and director disqualification is an important deterrent for misuse of inside information. ASIC has made enforcement against insider trading a priority and has established a dedicated criminal investigation taskforce to strengthen investigations and prosecutions in this area.

Professional Significance

The Stewart case underscores several enduring enforcement principles:

• Insider trading liability extends beyond formal corporate insiders; individuals who come into possession of confidential takeover information through informal connections and then trade on it remain fully exposed to criminal sanction when they act on that information.

• Takeover-related information is highly price-sensitive, and certainty of a corporate approach before announcement typically satisfies the statutory test for “inside information.”

• Criminal sanctions for insider trading are actively pursued, with penalties including imprisonment, profit disgorgement, and potential automatic disqualification from company directorships where appropriate.

• The case reinforces the regulatory objective that equal access to market-sensitive information is foundational to investor confidence and the proper functioning of Australian capital markets.

Authored by Campbell Dore

Publisher

The Brief

campbell@thebrieflaw.com.au