Published by the Stockbrockers Association of Australia in the Stockbrokers Monthly, November 2014.

Part I of this article followed a day in the life of a suspicious trade detected by an ASIC analyst using the Market Analysis and Intelligence (MAI) surveillance system.* Three months have now passed since MAI issued a trading alert for Acme Biotech Corporation (ABC) and a subsequent review revealed significant purchases of ABC shares by Mr Brian Long prior to the issue of a price sensitive announcement by ABC. During this time, ASIC's Enforcement team has worked closely with the Market and Participant Supervision team to investigate the matter.

Investigations by ASIC have revealed a professional association between Mr Long and Dr Bruce Short, the Chief Medical Officer of ABC. Statutory requests issued to contract for difference (CFD) providers identified that Dr Short also profited from trading CFDs in ABC around the time of the announcement.

This fictionalised account of events takes up the story as ASIC seeks to obtain search warrants to gather further evidence for the investigation.**

Monday

8:45 am – Based on information and evidence obtained to date, a decision is made to apply for search warrants for Mr Long and Dr Short's homes and Mr Long's business office under the Crimes Act.

9:00 am – An ASIC staff member finalises draft search warrants and an affidavit in support. The warrants specify the items ASIC is authorised to seize during the search – such as phones, computers or documents. The affidavit summarises ASIC's suspicions (including evidence gathered to date) in relation to possible insider trading by Mr Long and Dr Short. It also states why ASIC thinks further evidence may be obtained from the premises nominated in the warrants (search premises).

10:00 am – The investigation team is also preparing an application to the Federal Court for orders under the Corporations Act that would freeze Mr Long and Dr Short's bank accounts where the trading profits are being held. In addition, the investigation team has become aware (while reviewing the documents produced by Dr Short's broker) that Dr Short is moving to Hong Kong next week to start a new job. In consultation with a senior lawyer, the team decides to expand their application to temporarily restrain Dr Short from travelling overseas.

12:00 pm – The draft search warrants and affidavit are reviewed by a senior lawyer.

14:30 pm – An ASIC staff member travels to the Melbourne Magistrates' Court and swears the affidavit before a Magistrate, who then reviews the search warrants to determine that the criteria for granting a warrant are met before issuing them.

15:00 pm – An ASIC staff member attends the Federal Court, accompanied by a barrister, in relation to the application for the freezing and travel restraint orders. The Court is satisfied that there is a basis to grant the ex-parte orders (meaning that the orders were made without Mr Long or Dr Short appearing), but orders that the matter return to court on Wednesday.

16:45 pm – A tactical briefing is conducted for all ASIC staff who will be present when the warrants are executed. This includes briefing staff on the scope of the warrant and seizure procedures.

Tuesday

6:00 am – ASIC staff, Australian Federal Police (AFP) officers and forensic technology experts rendezvous near the search premises for a final briefing.

6:45 am – AFP officers arrive at the search premises and announce their presence to the occupants. They explain that they are there to execute a search warrant, hand over copies of the warrant documentation, and advise the occupants that they are entitled to seek independent legal advice in relation to the warrants. AFP officers then secure the premises and ensure that there are no weapons or other hazards.

7:00 am – Once the premises have been secured by the AFP, ASIC staff are permitted to enter the search premises. The senior investigator maps out the premises and formulates a search plan before assigning staff to different areas. ASIC staff begin a meticulous search for items that fall within the terms of the search warrant.

9:45 am – An ASIC staff member locates a Blackberry and laptop computer in Mr Long's study. Forensic technology experts begin searching the devices for evidence of insider trading.

12:30 pm – Forensic technology experts identify emails between Mr Long and Dr Short in which they discuss trading in ABC shares. The senior investigator is satisfied that the Blackberry and laptop satisfy the conditions in the search warrant and decides to seize them.

14:45 pm – ASIC staff at each of the search premises have obtained a significant amount of relevant evidence. Among documents seized from Mr Long's office is a draft of ABC’s price sensitive announcement. Mr Long and Dr Short (and their legal representatives) are given the opportunity to review the seized items before they are securely packaged and taken away.

* 'A day in the life of a suspicious trade' Part I was published in the October edition of Stockbrokers Monthly.

** Any similarity or reference to an actual individual or entity is purely coincidental.