Asic Wins Over Misleading Statement
The Age
Saturday July 5, 2008
THE Australian Securities and Investments Commission has succeeded in overturning a November court judgment that had raised concerns in legal circles about the regulator's ability to police misleading stock exchange announcements.
The case involves a memorable September 2005 claim by Citrofresh International that it had developed a disinfectant spray capable of stopping the spread of the HIV virus. The share price trebled the day the statement was released but later lost the gains.Last year Citrofresh and ASIC signed a statement of agreed facts in the Federal Court, in which the company admitted to issuing a false statement that could affect trading in its shares.But the regulator lost a related action against Citrofresh chief executive Ravi Narain.Justice Alan Goldberg ruled that ASIC had failed to prove Mr Narain's involvement in issuing the statement. Nor had it proved that the statement related to "a financial product" as required by the Corporations Act, he said.Justices Ray Finkelstein, Peter Jacobson and Michelle Gordon set aside the findings and ordered the case be reheard.Justice Finkelstein criticised the way ASIC had pleaded its case about Mr Narain's involvement but said: "The real culprit ... is the person in authority who, with knowledge of its contents, gave the instruction that the release be sent to the ASX for publication." Justices Jacobson and Gordon said Justice Goldberg had been too narrow in his interpretation of "financial product"."To say that one must parse and analyse the announcement to determine whether it expressly refers to the company's shares or the value of them, is, with respect to the primary judge, contrary to the meaning of the section and to commercial reality," they said.ASIC commissioner Belinda Gibson said yesterday the appeal decision "removes a serious question over the scope" of the law.
© 2008 The Age