While I've been Downunder, I've been following with interest news accounts of the Steve Vizard case. The television entertainer turned businessman just got slapped with a A$390,000 fine and a 10 year ban from serving on corporate boards of directors. As nearly as I can tell based on news accounts, and assuming they're accurate, Vizard's conduct would raise issues under corporate opportunity doctrine (or would have if he were under US corporate law) in that he apparently set up a firm to broadcast AFL games online even though Telstra - on whose board of directors he sat - was negotiating with the AFL. His conduct also would raise questions under the interested director doctrine (ditto re US law) because he apparently was on the boards of both Telstra and the Melbourne cricket club while they were negotiating a contract. Finally, under Aussie law, he allegedly commited insider trading by virtue of trading in the stock of a number of companies dealing with Telstra on the basis of material nonopublic information he learned by virtue of his position on the Telstra board. The same would have been true under US law, of course. (Here's a good summary of the case.)
All I can say is Vizard's damn lucky he's not in the US, where the criminalization of agency costs has led to multimillion dollar fines and long prison sentences. Granted, the corporate opportunity and interested director aspects of the case normally would not be handled under criminal law in the US anymore than they were in Australia, although the Adelphia and Tyco cases suggest that US prosecutors could well have brought an indictment if he were over here.
One of the interesting lessons I've learned from this case is that clarity can be a serious disadvantage for prosecutors. As one commentary put it:
Running to nearly 10 pages in the Corporations Act - compared with one paragraph in the US Securities Exchange Act - Australia's insider trading laws cast the broadest net anywhere. But there's a problem: our laws might be tough on crime but they're also tough to enforce. This is why the Australian Securities and Investments Commission has an appallingly low success rate: less than one in three.
In contrast, the SEC has vigorously resisted proposals to define insider trading in US law with anything like the precision of Australian law. As a result, as I pointed out in my article Insider Trading Regulation: The Path Dependent Choice between Property Rights and Securities Fraud, the definition of insider trading has been left to the courts to develop on a case-by-case basis, which in turn has left the law fairly vague on the margins, which gives significant advantages to prosecutors, especially in plea negotiations.
