Menzies and Australian Securities and Investments Commission

The Australian Securities and Investments Commission (ASIC) sought to ban Mr. Menzies from providing financial services for four years. ASIC alleged that Mr. Menzies had contravened section 1041A of the Corporations Act 2001 (Cth) by engaging in transactions that created an artificial price for trading in financial products on a financial market. The court was required to determine whether Mr. Menzies' conduct constituted a contravention of section 1041A, and if so, what the appropriate length of the banning order should be.

The court considered whether the transactions entered into by Mr. Menzies had the effect of creating an artificial price for trading in financial products on a financial market. Section 1041A prohibits a person from engaging in 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. The court examined the purpose of the transactions, noting that they were entered into for the sole purpose of settling a difference arising from other transactions, effectively transferring profit or loss. The court reasoned that such transactions, while appearing to be genuine trades, did not reflect the forces of genuine supply and demand in an open, informed, and efficient market.

Applying the principles from cases such as *Director of Public Prosecutions (Cth) v JM* [2013] HCA 30, the court found that the transactions entered into by Mr. Menzies were not reflective of genuine supply and demand. The purpose of facilitating the payment of a debt or the transfer of profit or loss meant that the transactions were not undertaken for the ordinary commercial reasons that would typically drive market prices. The court concluded that these transactions were likely to have the effect of creating an artificial price, thereby contravening section 1041A of the Act. The court ultimately varied the initial banning period, extending it to reflect the seriousness of the contravention and the need for deterrence.