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22-157MR Former Sigma Healthcare general manager sentenced for insider trading
On 27 June 2022, Mr Michael Story, of Elwood, Victoria, was sentenced to 14 months imprisonment for insider trading. The Court ordered Mr Story be released forthwith upon a recognizance in the sum of $5,000 and on condition to be of good behaviour for three years. In addition, Mr Story was ordered to pay a fine of $30,000.
Mr Story, a former general manager of Sigma Healthcare Limited (Sigma), was also ordered to pay a pecuniary penalty of $70,179.37 under the Proceeds of Crime Act, representing the benefit he obtained from his insider trading.
The Court found Mr Story sold Sigma shares while he was in possession of inside information regarding the status of negotiations to renew the supply contract between Sigma and Chemist Warehouse.
ASIC Deputy Chair Sarah Court said, ‘Mr Story was a true insider, an individual with sensitive company information that he knew would affect the share price. He sold his shares with inside information, giving him an unfair advantage. 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.’
On 2 July 2018, Sigma publicly announced that its supply contract with Chemist Warehouse would cease on 30 June 2019. This contract was very significant to Sigma’s business. Proposed terms for a contract renewal had not been agreed. Following this announcement, Sigma shares closed 40 per cent lower compared to the previous day.
Mr Story had been heavily involved in the negotiations and knew that it was unlikely that the contract would be renewed. Mr Story knew this information was not generally available and would have had a material effect on the Sigma share price. With this knowledge, Mr Story sold 250,000 shares in Sigma for $202,629.
His Honour Judge Moglia denounced the inherent dishonesty in Mr Story’s conduct finding Mr Story to be a true insider and that there was no explanation for the conduct other than an attempt to avoid significant losses. Had Mr Story not pleaded guilty he would have imposed a sentence of two years’ imprisonment, to be released after 14 months upon a recognizance.
The Commonwealth Director of Public Prosecutions prosecuted the matter after a brief and referral from ASIC.
Sigma is a wholesale and distribution pharmaceutical business.
At the time of the offending, the maximum sentence for insider trading in breach of section 1043A of the Corporations Act was 10 years imprisonment. That maximum sentence has since increased to 15 years imprisonment.