Five years' jail for insider trading: no trivial matter

The recent re-sentencing of fund manager Rodney Forrest to five years and three months' imprisonment for insider trading offences should give every person in possession of material non-public information (such as company officers, AFSL holders and authorised representatives) reason to pause and reflect. This is not a case from a bygone era of lax enforcement – it is a 2026 outcome, prosecuted by a dedicated insider trading team that ASIC established specifically to accelerate investigations and increase criminal referrals.

Any business that handles inside information in any form, or representatives who trade while exposed to price-sensitive intelligence need to carefully understand the current enforcement landscape, and what to do if things go wrong.

ASIC's enforcement focus: insider trading is a 2026 priority

Insider trading is not merely an "enduring priority" for ASIC – it has been elevated to a dedicated enforcement focus for both 2025 and 2026. ASIC's published enforcement priorities for 2026 expressly identify "strengthening investigation and prosecution of insider trading conduct" as a standalone area of concentration.

This is backed by institutional commitment. In late September 2024, ASIC established a dedicated insider trading team designed to swiftly progress investigations and increase the number of criminal briefs referred to the Commonwealth Director of Public Prosecutions (CDPP). The Forrest matter was the first significant outcome delivered by that team, with the investigation finalised within just 16 months.

Critically, ASIC's enforcement activity has increased significantly across all its priority areas: in the 12 months to late 2025, ASIC doubled the number of new investigations it commenced and nearly doubled the number of new court proceedings filed. For financial services participants, the emerging message is that ASIC is now better resourced, faster, and more willing to pursue criminal outcomes than before.

The Forrest case: a cautionary tale

On 22 May 2026, the Full Federal Court re-sentenced former investment manager Rodney Forrest to five years and three months' imprisonment following his appeal against an original sentence of six years imposed in January 2026. Mr Forrest's non-parole period of three years remained unchanged, and he will be eligible for parole on 23 January 2029.

Mr Forrest had pleaded guilty in August 2025 to insider trading and procuring others to trade in more than $3 million of Platinum Asset Management shares. The Full Court allowed the appeal on narrow grounds: that the sentencing judge had erred in finding that Mr Forrest's false denials during initial ASIC interviews affected the assessment of objective seriousness, rather than limiting that consideration to remorse and the weight given to his plea.

However, the Court was emphatic that the offending remained serious. It emphasised that Mr Forrest's conduct involved premeditation, planning, a significant breach of trust, and a high degree of sophistication, justifying a substantial custodial sentence.

The Court held: "These offences are unquestionably serious. It is a significant example of offences of this nature." General deterrence was identified as a primary sentencing consideration.

For company officers, AFSL holders and their representatives, several features of this case warrant careful attention:

• the speed of the investigation – ASIC's dedicated team completed its work and referred the brief to the CDPP within six months;

• the severity of the sentence, which reflects a judicial willingness to impose significant custodial terms for market misconduct; and

• the Court's finding that false denials during ASIC interviews, while not bearing on objective seriousness nevertheless affected the assessment of remorse and mitigating weight given to the plea. This underscores the danger of ill-considered responses during an ASIC investigation and the value of getting specialist advice before an examination/interview with ASIC.

What constitutes insider trading under the Corporations Act?

The prohibition on insider trading is set out in section 1043A of the Corporations Act 2001 (Cth). A person who possesses "inside information" and knows, or ought reasonably to know, that the information is inside information must not:

• apply for, acquire, or dispose of financial products (or enter an agreement to do so);

• procure another person to apply for, acquire, or dispose of financial products; or

• directly or indirectly communicate the information to another person whom they know, or ought reasonably to know, would be likely to trade or procure trading.

"Inside information" is information that is not generally available and that a reasonable person would expect to have a material effect on the price or value of financial products. Importantly, Australia's insider trading prohibition is one of the widest in the world – it catches any person in possession of inside information, regardless of whether they have any formal connection to the company whose securities are being traded.

The three forms of prohibited conduct are trading, procuring, and tipping.

This breadth means that AFSL holders, authorised representatives, analysts, compliance officers, and even administrative staff who inadvertently come into possession of price-sensitive information may be caught by the prohibition if they trade or communicate that information without proper safeguards.

The risk of inadvertent breach should not be underestimated. In a financial services environment where information flows freely between teams – deal teams, research desks, client relationship managers, and trading functions – the potential for an individual to come into possession of inside information without appreciating its significance is very real. Without effective information barriers and clear policies, exposure can arise from something as simple as an overheard conversation, a shared email, or a careless remark in a team meeting.

Compliance frameworks: your first line of defence

For AFSL holders, robust compliance frameworks are not merely good corporate governance, they are a practical defence against both inadvertent breach and regulatory scrutiny. Key elements include:

Information barriers (Chinese walls). The Corporations Act recognises the Chinese wall defence for bodies corporate under section 1043F, which provides that a company will not breach the insider trading prohibition where an officer possesses inside information, provided the decision to enter the transaction was made by a different person and adequate arrangements existed to ensure the information was not communicated to the decision-maker. This statutory defence only assists firms that can demonstrate their barriers are genuinely effective, adequately documented, and rigorously enforced.

Personal trading policies. Authorised representatives and employees should be subject to clear restrictions on personal trading, including pre-clearance requirements, blackout periods, and mandatory disclosure of trading accounts. These policies should address not only trading by the individual but also trading by associates and family members.

Training and awareness. Regular, documented training on what constitutes inside information, how it should be handled, and the consequences of breach is essential. Training should be tailored to role – a research analyst faces different risks from a client adviser. Training should also be refreshed whenever regulatory guidance or enforcement trends evolve.

Escalation protocols. Staff must know what to do if they suspect they have come into possession of inside information. Clear escalation procedures, including immediate notification to the compliance function and cessation of trading in the relevant security can prevent a compliance lapse from escalating into a criminal matter.

How ASIC investigates suspected insider trading

Understanding ASIC's investigative methodology is important for two reasons: it informs the design of compliance systems, and it shapes how you should respond if your firm or a representative becomes the subject of regulatory attention.

Market surveillance. ASIC uses sophisticated real-time market surveillance systems to detect unusual trading patterns and anomalies, including price movements and volume spikes ahead of market-sensitive announcements. This surveillance operates continuously and can identify suspicious activity long before any complaint is received.

Preliminary analysis. Once an anomaly is detected, ASIC's surveillance team conducts preliminary analysis, which may include reviewing trading data, examining ASX announcements, and cross-referencing information from brokers and market participants. Matters are then assessed for referral to specialist investigation teams.

Compulsory notices to produce documents. Under sections 30 and 33 of the ASIC Act 2001 (Cth), ASIC can compel any person to produce books, records, emails, text messages, financial records, and other documents relevant to its investigation. These notices can extend to brokers, banks, employers, and telecommunications providers – not just the suspected insider.

Compulsory examinations (section 19). One of ASIC's most powerful tools is the compulsory examination under section 19 of the ASIC Act. These are conducted in private, under oath, and the examinee is compelled to answer questions even where the answers may be self-incriminating (subject to limited use-immunity protections). Examinees are entitled to legal representation, but the lawyer's role is circumscribed – they may not answer questions on the examinee's behalf.

Forensic analysis. Investigations routinely involve forensic examination of electronic communications, phone records, and digital trading platforms. ASIC may also apply for search warrants to seize physical and electronic evidence where there is a risk of concealment or destruction.

Referral to the CDPP. Where ASIC's investigation identifies sufficient evidence of criminal conduct, the matter is referred to the Commonwealth Director of Public Prosecutions, who makes an independent assessment of whether to commence criminal proceedings.

Consequences of breaching insider trading laws

The consequences of an insider trading finding are severe and multi-dimensional:

Criminal penalties. Insider trading, prosecuted as a criminal offence, carries a maximum penalty of up to 10 years' imprisonment for individuals. Fines of up to $765,000 for individuals or three times the value of the benefit obtained by the conduct may also be imposed. The Forrest sentence of five years and three months demonstrates that substantial custodial terms are being imposed in practice.

Civil penalties. ASIC may alternatively pursue civil penalty proceedings, which can result in pecuniary penalties, compensation orders, and banning orders preventing involvement in corporate management or financial services.

Licence implications. A criminal conviction or civil penalty finding for insider trading will almost inevitably call into question the fitness and propriety of the individual to hold an AFSL or act as an authorised representative. ASIC also has the power to impose banning orders and to suspend or cancel licences.

Reputational damage. ASIC publishes media releases and enforcement outcomes publicly. The reputational consequences of being publicly named in connection with insider trading allegations, even where the matter is ultimately resolved without conviction can be devastating for a business or financial services career and for the firm associated with the individual.

What to do if approached by ASIC or if a breach is suspected

If you or your business becomes aware of a potential insider trading issue – whether through internal monitoring, an ASIC approach, or receipt of a compulsory notice – there are several critical principles to observe:

Do not delay. The single most costly mistake is waiting. Acting immediately preserves options; delay removes them.

Do not destroy or alter documents. Once you become aware, or should reasonably become aware, that an investigation may be underway, destroying, altering, or concealing documents is itself a serious criminal offence. The instinct to tidy up records can transform a civil matter into a criminal one.

Do not respond to ASIC without legal advice. Anything said to ASIC in writing, by telephone, or in person can be used in subsequent proceedings. What appears to be an innocent clarification can amount to a damaging admission. The Forrest case illustrates that even false denials during initial interviews, while not determinative of guilt, can adversely affect sentencing outcomes.

Engage specialist defence litigation lawyers/counsel immediately. ASIC investigations are not ordinary legal matters. The combination of compulsory powers, confidentiality restrictions, privilege complexities, and the potential for simultaneous civil and criminal exposure makes them among the most technically demanding situations a financial services participant can face. A solicitor experienced in regulatory defence and white-collar criminal matters can assist in managing the investigation strategically, protecting privilege, preparing for section 19 examinations, and ensuring that the individual's rights are preserved at every stage.

Conduct an internal investigation – carefully. Where a potential breach is identified internally, a properly scoped internal investigation can assist the firm in understanding its exposure, preserving relevant evidence, and making informed decisions about self-reporting. However, such investigations must be conducted under legal professional privilege (where available) and with careful regard to the firm's reporting obligations under the Corporations Act.

The value of early engagement with experienced defence lawyers

There is a persistent misconception that seeking legal advice in the face of a regulatory investigation is an admission of wrongdoing. In fact, the opposite is true. Regulatory suspicion is not proof of wrongdoing, and every person is entitled to the presumption of innocence and to assert their legal rights.

Early engagement with experienced defence litigation lawyers can:

• provide confidence and clarity through a confronting and unfamiliar process;

• reduce the risk of adverse enforcement action;

• favourably influence the direction of an investigation;

• assist in preparing for compulsory examinations in a manner that protects the individual's position;

• help frame the factual narrative before ASIC or the CDPP forms a concluded view; and

• ensure that any cooperation with the regulator is strategic, measured, and does not inadvertently prejudice the individual's interests.

Not every investigation results in charges, and not every allegation is substantiated. In many cases, careful and early legal engagement resolves matters before formal enforcement action is taken. In others, it ensures that if charges are brought, the individual is in the strongest possible position to defend them.