A day in the life of a suspicious trade: Part I

Published by the Stockbrockers Association of Australia in the Stockbrokers Monthly, October 2014.

This fictionalised account of events follows a day in the life of a suspicious trade detected by an ASIC analyst using the Market Analysis and Intelligence (MAI) surveillance system. It is based on alerts, enquiries and other techniques currently utilised by ASIC analysts. It is indicative of how ASIC would respond if faced with a similar factual scenario.

10:21 am – Acme Biotech Corporation (ABC) issues a price sensitive announcement which is published on the ASX's announcement platform. The announcement headline reads 'ABC identifies cancer gene cure'. Details of ABC's medical breakthrough are provided in the full announcement PDF.

10:31 am – ABC is released from pre-open and trading commences. ABC's share price opens at 10 cents but rapidly increases by 100% to 20 cents.

10:33 am – MAI issues trading alerts for ABC for (a) intra-day price movement, (b) intra-day volume and (c) broker volume.

10:34 am – An ASIC analyst (the Analyst) reviews trading in ABC, including in the weeks prior to the announcement. The Analyst identifies that in the lead up to the announcement, 2,500,000 ABC shares were purchased over five separate trades for an average price of 5 cents. 

10: 36 am – Unique client identifiers enable the Analyst to determine that the trades were conducted by the same person (the Client) through a market participant (the Broker).

10:40 am – Further analysis reveals that after the announcement was issued and trading commenced, the Client sold 2,500,000 shares in ABC resulting in a realised profit of $375,000.

10:45 am – Using new MAI insider trading reports, the Analyst is able to review the Client's trading at both a daily aggregate and time-series level and reconstruct a portfolio of their trading. [MAI is able to prepare these reports in seconds, where previously they would take several days to prepare after first obtaining client details from the broker].

11.10 am – A comparison of the Client's recent trading activity and historical trading activity highlights significant anomalies as against their usual trading patterns.

11:45 am – The Analyst prepares a report on recent trading in ABC, which is submitted to senior surveillance staff for review. The report recommends that ASIC issue:

a statutory request to the Broker (pursuant to section 912E of the Corporations Act), seeking details of the Client's identity, their statement of account and other client-specific information;

statutory requests to contract for difference providers (given the leverage and profits attainable) seeking a scrip ledger for ABC; and

a voluntary letter to ABC asking them to identify all individuals who had knowledge of the information contained in the announcement prior to its release.

12.55 pm – Senior surveillance staff review and approve the Analyst's recommendations. In addition, they recommend that the Analyst seek telecommunications records for the Client, once their identity has been established.

15:30 pm – The Analyst prepares statutory requests which are issued to the Broker and others by email. [Recipients have three business days to respond to a section 912E request from ASIC]. A voluntary letter is also sent to ABC requesting a response as soon as possible, or in any event, within seven days.

15.55 pm – The Broker contacts the Analyst by phone and identifies the Client as Mr Brian Long, of Clifton Hill, Victoria.

16.20 pm – The Analyst prepares a search request for the Client's telephone records. The request is reviewed by a Senior Lawyer and signed by a Senior Manager before being submitted to the Client's telephone carrier. [Telecommunications records are usually provided to ASIC within 48 hours of such a request being made].

16:50 pm – The Analyst commences searches of internal ASIC databases and the internet seeking information about Mr Long, in particular, any association or connection between Mr Long and ABC. This process may take several days as possible connections are identified and verified. [ASIC has been developing its ability to mine unstructured data and a number of techniques would be utilised during this process.]

Note:  If evidence of possible insider trading is established by the Analyst, this matter will be referred to ASIC's Market Integrity Enforcement team for further consideration and possible investigation.

ASIC website update coming

ASIC is making some changes to its website (www.asic.gov.au) to make the site more accessible and easy to use.  The changes include:

  • a responsive design that makes it easier to view on mobile devices
  • a redesigned homepage with direct links to high-traffic tasks and content
  • an improved internal search function, and
  • clearer paths and signposts to existing content.

The updated website will not be a completely new website. Most of the content will be the same as it is on the current site. A significant advantage of the new website is that it has been designed from a user's perspective. As such, it will be easier to navigate and we hope a much better experience for users. We plan to go live with the updated website in late 2014 and will provide additional details of the change-over in due course.

Short sellers and entities submitting reports on behalf of short sellers will continue to submit short selling reports through ASIC Connect once the website has been updated. However, existing links to the short selling reporting page which have been 'bookmarked' by users may be lost when the new website goes live. If this applies to you, you may wish to bookmark the following link to ASIC's information about short selling and the short position reporting register, which is currently valid and will remain live once the new website is in operation: www.asic.gov.au\shortselling.

Last updated: 10/08/2021 11:18