What every investor should know about insider trading
A former investment manager has been sentenced to six years in prison in one of the most brazen insider trading cases ASIC has pursued in recent years.
Rodney Forrest secretly accessed the computer of Regal Partners' chair in August 2024 and photographed confidential documents about a planned takeover of Platinum Asset Management.
He then bought, and encouraged others to buy, more than $3 million worth of Platinum shares before leaking details of the deal to the media.
The trades netted more than $300,000 in profit. Forrest will be eligible for parole in 2029.
The case is a stark reminder of how seriously regulators treat insider trading.
In Australia, the offence carries penalties of up to 15 years' jail and fines of more than $1.5 million.
But what actually counts as insider trading, and why should everyday investors care?
What is insider trading?
Insider trading is when someone trades financial products, such as shares, while in possession of information that is not publicly available and could affect the price of that investment.
Crucially, the rules don't just apply to company insiders like executives or board members.
Anyone who receives and acts on inside information whether through work, personal connections or chance access, can be caught.
It's not just about buying shares
Many people assume insider trading only means buying shares ahead of good news. In reality, the net is much wider.
It is also illegal to:
- sell shares before bad news becomes public
- recommend or encourage someone else to trade
- tip off another person who is likely to trade
- ask someone else to trade on your behalf
Even choosing not to trade, if that decision is based on inside information, can put you at risk.
Importantly, it doesn't matter if the information later turns out to be wrong. What counts is whether you believed it was inside information when you acted.
What counts as 'inside information'?
Inside information is any non-public information that a reasonable person would expect to have a material impact on a company's share price.
Common examples include:
- details of a takeover or merger
- upcoming financial results
- major customer contracts or strategic partnerships
- changes in senior management or board structure
It can also apply indirectly. Trading based on sensitive information about a supplier, competitor or customer of a listed company can still fall foul of the law.
Is insider trading a victimless crime?
The Rodney Forrest case marks the first outcome for ASIC's new specialist insider trading team which investigated and finalised the case within 16 months of the offending.
It's the result of a perennial battle to address what is often seen as a victimless crime.
Ten years ago, then-ASIC chair Greg Medcraft published an op-ed about insider trading after disgraced trader Oliver Curtis was sentenced to two years' jailtime for it.
After Curtis served one year, he went on to make a small fortune investing in liquid that cools down data centres.
Three months after serving his own sentence, Curtis' partner in insider trading and former classmate at elite private school St Ignatius College, John Hartman was scooped up by Australia's richest man Andrew Forrest, the Sydney Morning Herald reported.
Critics questioned whether the punishment fit the crime.
"This is not a victimless crime. Those on the other side of the trade - those who were not "in the know", certainly suffered," Medcraft said.
"They did not make the $1,433,727.85 that Curtis did and were denied a fair and equal chance to make a profit from their trading."
ASIC's focus on insider trading
In 2024, ASIC reviewed the cleanliness of Australia's markets from 2006 onward.
It found that while Australia's equity markets are among the "cleanest in the world", the review also identified two periods where conditions deteriorated - in 2020-21 and again in late 2023.
Medcraft had previously shared what Australian investors would be losing if standards slipped.
"We are all affected, at least indirectly, by insider trading," Medcraft said in the op-ed.
"Just as we are all beneficiaries of living in a society where the rule of law is respected, where markets are assumed to be fair and transparent and where it is assumed sensible, informed decisions are possible."
This led to strengthening the regulator's scope and resulted in the formation of ASIC's specialist team.
A decade after the infamous Curtis case, current ASIC Chair Joe Longo echoed the sentiment of his predecessor: "Insider trading is a zero-sum game."
"When somebody profits from inside information, everyone else loses, including every Australian with a superannuation or investment account."
Only this time the consequences were far greater: Where Curtis and Hartman profited in the millions, Forrest profited more than $300,000.
Where Curtis was sentenced to two years jailtime, Forrest was sentenced to six.
Since 2009, ASIC investigations have led to 46 criminal insider-trading convictions, and the regulator is narrowing the space for anyone hoping to profit from information kept out of reach of everyday investors.
"ASIC will continue cracking down on insider trading and other misconduct that damages," says the outgoing ASIC Chair.
"Australia is recognised globally for the integrity of its financial markets, and ASIC is determined to keep it that way."
Get stories like this in our newsletters.
