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Market misconduct: High Court gives guidance on s.1041A of the Corporations Act

The High Court has overturned a Victorian Court of Appeal judgment concerning section 1041A of the Corporations Act 2001 (Cth) and has re-affirmed the purpose test in determining an ‘artificial price’.

Director of Public Prosecutions (Cth) v JM [2013] HCA 30 considered s.1041A of the act, which prohibits persons from taking part in or carrying out transactions that have, or are likely to have, the effect of creating or maintaining an artificial price for trading in financial products on a financial market operated in this jurisdiction.

The respondent (JM) was indicted on several charges of market manipulation under s.1041A and related conspiracy charges. An entity associated with JM had taken out a margin loan to invest in shares in an ASX-listed company (known as ‘X Ltd’). The DPP alleged that the accused had entered into an arrangement with family members whereby shares in X Ltd were purchased in order to prevent the day’s closing price for the shares falling below the point at which the lender would make a margin call…

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