Melbourne man jailed for insider trading of ASX shares

Former executive of a listed company sentenced after selling his stocks while aware of information that the public was not privy to.

asx share penalty represented by lots of fingers pointing at disgraced businessman Crown royal commission WA

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

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.

Sold his shares before they fell 40%

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.

The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on Share Market News

Person pointing at an increasing blue graph which represents a rising share price.
Broker Notes

These ASX 200 shares could rise 33% to 37%

Analysts at Morgans think these shares could deliver big returns.

Read more »

Fancy font saying top ten surrounded by gold leaf set against a dark background of glittering stars.
Share Gainers

Here are the top 10 ASX 200 shares today

It was a volatile, but negative day for ASX investors this Thursday.

Read more »

Woman with an amazed expression has her hands and arms out with a laptop in front of her.
Share Gainers

Guess which ASX 200 stock turned $5,000 into $34,264 in just three years!

Investors have been piling into this ASX 200 stock for years, sending the share price soaring.

Read more »

Overjoyed man celebrating success with yes gesture after getting some good news on mobile.
Share Gainers

Why Beach Energy, Meeka Metals, Monash IVF, and Qantas shares are racing higher today

These shares are having a better day than most on Thursday. But why?

Read more »

Female miner in hard hat and safety vest on laptop with mining drill in background.
Broker Notes

Experts reveal 2 buys and 1 sell in the ASX 200 materials sector

And they're not all mining companies, either.

Read more »

A male investor wearing a blue shirt looks off to the side with a miffed look on his face as the share price declines.
Share Fallers

Why Betmakers, Cettire, Johns Lyng, and Vulcan shares are falling today

These shares are having a tough session on Thursday. But why?

Read more »

A smiling miner wearing a high vis vest and yellow hardhat does the thumbs up in front of an open pit copper mine.
Broker Notes

Why Macquarie expects this ASX All Ords copper stock to soar 48% in a year

Macquarie forecasts another big year of gains ahead for this ASX All Ords copper stock. But why?

Read more »

Middle age caucasian man smiling confident drinking coffee at home.
Broker Notes

How much upside does Macquarie expect for Steadfast Group shares?

The broker has given its verdict on this blue chip.

Read more »