Ethics and Governance 2220,

ORIGINAL PAPER

When Kamay Met Hill: Organisational Ethics in Practice

Jonathan A. Batten1 • Igor Lončarski2 • Peter G. Szilagyi3,4

Received: 30 November 2015 / Accepted: 3 January 2017 / Published online: 27 January 2017

� Springer Science+Business Media Dordrecht 2017

Abstract The Kamay and Hill insider trading conviction

in Australia highlights many of the issues and problems

involved in the prevention, detection and prosecution of

insider trading. The case uniquely highlights how ethical

behaviour is instilled at home, in school and in society, and

the need for ethical responsibility at the personal and

organisational level to complement legal rules and

enforcement. We use the Kamay and Hill case to explore

the reasons behind the failure of the traditional top-down

approach to insider trading prevention, where institutional

ethical codes of conduct largely reflect and rely upon

national rules, norms, and regulation. We propose a bot-

tom-up approach to ensure that individual and organisa-

tional behaviour is ethical, where emphasis is not on

compliance but on a set of core ethical values that allow

individual and corporate expression. It is our strong belief

that compliance cannot replace ethics.

Keywords Abuse of public office � Australia � Ethical norms and values � Ethical standards and codes � Industry standards � Foreign exchange market � FX Global Code � Insider trading � UN Global Compact

Introduction

In early 2015 Lukas Kamay, previously a currency trader at

National Australia Bank (NAB), and his accomplice

Christopher Hill, a former employee of the Australian

Bureau of Statistics 1 (ABS), were convicted of the largest

insider trading scandal in Australian history. Kamay and

Hill had gone to university together and had a simple but

meticulously planned trading scheme: Hill would obtain

pre-release ABS economic data, which Kamay would then

trade on using leveraged Australian dollar (AUD)–US

dollar (USD) foreign exchange contracts (termed margin

FX contracts). Kamay executed a total of 45 trades care-

fully timed to avoid detection and offsetting news flows

and made a profit in excess of A$8 million (US$6 million)

within one year. Unsurprisingly for opaque over-the-

counter (OTC) foreign exchange markets, the pair were

tipped off by the brokers responsible for executing their

trades, rather than by market surveillance and technology

efficiently used in stock markets to detect insider trading

through price irregularities (see Frino et al. 2013; Olmo

et al. 2011).

This paper uses the Kamay and Hill case to examine the

system of insider trading prevention and ethical standards

& Igor Lončarski [email protected]

Jonathan A. Batten

[email protected]

Peter G. Szilagyi

[email protected]; [email protected]

1 Department of Banking and Finance, Monash University,

PO Box 197, Caulfield East, VIC 3145, Australia

2 Faculty of Economics, University of Ljubljana, Kardeljeva

pl. 17, 1000 Ljubljana, Slovenia

3 CEU Business School, Central European University, Frankel

Leó út 30-34, Budapest 1023, Hungary

4 Judge Business School, University of Cambridge,

Trumpington Street, Cambridge CB2 1AG, UK

1 The Australian Bureau of Statistics is an independent statutory

authority of the Australian government whose functions duties and

powers are set out in the Australian Bureau of Statistics Act 1975 and

the Census and Statistics Act 1905.

123

J Bus Ethics (2018) 147:779–792

https://doi.org/10.1007/s10551-017-3435-4

within the banking and finance industry. The Kamay and

Hill case provides unique insights into the role that ethical

codes and values now play in moderating, or otherwise

affecting, self-serving behaviour in financial markets. We

argue that unless the existing compliance-based system of

regulatory rules and industry standards comes to reflect

core ethical values, then insider trading and other illegal

and unfair market practices will remain commonplace.

Financial markets comprise financial market intermedi-

aries such as banks and non-bank financial institutions, as

well as other stakeholders including regulators, industry

organisations, non-financial corporations and households.

Judicial process and regulations are intended to support

participation in financial markets by economic agents with

heterogeneous skills and information. Insider trading laws

are argued to be especially relevant in ensuring the fairness

and integrity of financial markets worldwide (Bhattacharya

2014). While it is important to recognise the unique cul-

tures, religion and legal systems within each society that

form the context for individual values and norms, 2 there is

a minimum set of legal requirements needed to ensure

contractual fairness in financial market transactions and

improve investor perceptions of market integrity. The

enforcement of these legal requirements is also important,

as evidenced by the literature on insider trading law

enforcement in stock markets (Bhattacharya and Daouk

2002; Fernandes and Ferreira 2009).

The Kamay and Hill case uniquely highlights the need for

ethical responsibility at the personal and organisational level

to also complement legal rules and enforcement. Enforce-

ment activity suffers from major deficiencies in over-the-

counter markets where regulators’ radar for illegal actions is

attenuated (Silvers 2016). Indeed, Kamay’s trades were

never detected by foreign exchange market surveillance. The

global foreign exchange market has a daily turnover of

USD1.7 trillion, and the AUD–USD currency pair is the

fourth most-traded with a turnover of USD353 billion (BIS

2016a). Economic agents in this market attempt to make

profits from trading the various risks that arise from their

actual and speculative cash flows in local and foreign cur-

rency. However, since the exchange rate changes in response

to theoretically random new information, economic benefits

can only accrue to those on the right side of rate movements.

Koslowski (2011: 53) note that speculative profits are

financial intermediaries’ reward for the ‘‘value-adding

activity of the absorption of uncertainty’’. Kamay and Hill,

however, took no such risk, and in fact timed their trades to

maximise their informational advantage while minimising

the probability of contrary news flows.

Ethical responsibility in the Kamay and Hill case is

especially important in the context of financial markets’

money-making culture that encouraged and possibly cul-

tivated behaviour that at its extreme involves breaching

both legal rules and organisational and societal codes of

ethics. Should Kamay and Hill’s employers have taken

greater responsibility for the actions of their employees

beyond obvious monitoring and the establishment of

organisational and personal codes of conduct? How far

should institutional responsibility go in terms of preventing

individuals from acting against the law or firm policies?

To provide insight into these critical issues, we interpret

the Kamay and Hill case in the context of various stylised

models that describe the relationship between organisational

culture, individual action and corporate accountability. The

context of financial crime relates to organisational culture

and its connection to industry, and then national rules and

laws. Clearly, organisational process at ABS was poor in that

Hill was able to easily, and unhindered by organisational

protocol, obtain and share confidential information that was

obviously market sensitive. Despite clear guidelines at the

national, industry and firm level, Kamay also successfully

executed his trades and managed his personal trading

simultaneously with NAB client positions, and during some

of the most turbulent trading on record. In fact, the ‘‘gung-

ho’’ culture in the dealing room in which Kamay worked is

both well known and was used by the defence as an attempt to

mitigate his sentence. 3

We add to the existing literature in two key areas of

research on the scale and scope of ethical policy and its

implementation at the corporate and institutional level. The

first concerns the nature and practice of ethics by key

stakeholders in the banking and finance industry (such as

Koslowski 2011). The second concerns empirical investi-

gation of the scale and scope of ethical attitudes and beliefs

in financial and non-financial corporations (e.g. Emerson

and McKinney 2010).

The paper is structured as follows: First, a review of the

literature on insider trading is provided, which builds

where possible on earlier studies such as Bhattacharya and

Daouk (2002) and Bhattacharya (2014). Then, attention is

directed towards the circumstances surrounding the Hill

2 There is a rich literature on the source of individual ethics and

norms. For example, Emerson and McKinney (2010) highlight the

importance of religion in personal ethics. Werner (2008) also notes

how religious holiness manifests in virtues of integrity and moral

purity.

3 Note that in Kamay and Hill’s case the court imposed a criminal

punishment on individuals who abused insider trading laws. Mean-

while, institutions that manipulate financial markets and cause much

more information distortion and social harm receive fines and

sanctions. The scandal surrounding the manipulation of the London

Interbank Offered Rate (LIBOR) is one such example (Hou and Skeie

2014). Here the reputational cost was overwhelmed by the potential

profits, thus the constraining effects that reputation may play on

insider actions were insufficient (Cui et al. 2015).

780 J. A. Batten et al.

123

and Kamay conviction. Next, we introduce various stylised

models that provide a context for the possible relationships

and interconnections in insider trading codes, values and

norms that may exist at the international, national, corpo-

rate, institutional and individual levels. 4 It is in this context

that the institutional and legal environment in Australia is

discussed and considered. Discussion is then directed to the

appropriate method of engendering good ethical practice.

Should ethical policy be implemented from a societal level

(top-down approach), or be driven by personal ethical

codes (bottom-up approach)? In either case, what more can

and should be done to inculcate an ethical culture at both a

personal and institutional level? The final section allows

for concluding remarks that address two key themes. First,

the issue on what more could be done to improve existing

codes and rules at the firm level, and second, what action

should be taken by the firm to prevent individuals acting

against the law or official firm policies. The broader con-

text of this last point is how ethical behaviour should be

encouraged and pursued.

Insider Trading Defined

Insider trading involves trading in financial markets on

material non-public information with the intention of

achieving a significant financial gain. Whether or not a

financial gain is achieved is irrelevant, the key issue is the

trader’s intention to misuse material information. In most

jurisdictions, insider trading is prohibited or criminalised to

protect the investing public.

With the globalisation of financial markets, international

standards of insider trading regulation and enforcement

have converged significantly in recent years (e.g. Beny

2007; Bhattacharya 2014; Bhattacharya and Daouk 2002;

Franklin 2013). Anglo-American common law countries

have commonly lead civil law countries in adopting and

enforcing insider trading rules. Insider trading was made

illegal in 1934 by the USA, 1966 by Canada, 1970 by

Australia and 1980 by the UK; in contrast, it was not

outlawed until 1988 by Japan, Switzerland and Spain, 1993

by China, and 1994 by Germany (e.g. Beny 2007; Franklin

2013). Recent insider trading regulations have been shown

to have improved price informativeness, reduced market

distortions, and generally enhanced market efficiency in

developed markets in particular (Betzer and Theissen 2010;

Fernandes and Ferreira 2009).

The legal basis for the prosecution of insider trading and

how insider trading rules are implemented at a personal,

industry and societal levels is complex. Based on a review

of US court decisions, settled enforcement proceedings,

and Securities and Exchange Commission (SEC) rules,

Nagy (2009) shows that fiduciary principles are frequently

not essential for the offense of insider trading. Nonetheless,

prosecutions remain difficult despite spectacular examples

of market failures. In the USA, the SEC prosecutes around

50 cases each year, with most cases brought on exchange-

based stock trading and many being settled out of court

(Ventoruzzo 2014). In Australia, the sentencing range for

insider trading had not been established until the present

Kamay and Hill case.

Insidertradingmaybeconsideredwithinthebroadercontext

of financial regulation where the focus is on access to infor-

mation. For example, Goshen and Parchomovsky (2006) argue

that financial market regulationmaybe divided into three broad

categories: (1) disclosure duties, which reduce the costs of

gathering information; (2) restrictions on fraud and manipula-

tion, which lower the costs of verifying information; and (3)

restrictions on insider trading that would undermine the

investment made in gathering and verifying information. Insi-

der trading imposes a penalty on other financial market par-

ticipants even if they are not affected directly by the actual act.

Broadly speaking, white-collar crime such as tax

avoidance and insider trading are often considered vic-

timless in that ‘‘there is no visible victim at their root’’

(Green 2010). This argument could also be applied to the

Kamay and Hill case, where neither the prosecution nor the

recent study of Batten et al. (2015) found detectable price

impacts around the trades. However, the lack of a visible

victim was not considered a defence when considering

Kamay and Hill’s insider trading profits (CDPP v Hill and

Kamay, 2015: 47). 5 Though not a consideration in the

Kamay and Hill case, insider trading can indeed have non-

trivial consequences in foreign exchange markets even if

the act is victimless. Since the exchange rate is the price to

exchange the currency of two different capital markets, it is

possible for adverse price movements to transfer to eco-

nomic agents in another economy. For example, consider

the costs and benefits arising from the AUD depreciating

relative to the USD. This price movement benefits Aus-

tralian exporters, but it hinders importers and may translate

into higher product prices for domestic consumers.

Whether insider trading without a visible victim should be

prosecuted is a contentious issue. McGee (2008) argues that

not all insider trading is unethical, and transactions without

obvious fraudulent harm to individuals or groups should be

permitted. Kamay and Hill’s criminal prosecution creates an 4 For the sake of brevity, we do not discuss popular normative

theories and potential conflicts between individual moral beliefs.

These issues are discussed at length by Hasnas (2016) and Reiter

(2016).

5 http://www.smh.com.au/cqstatic/12z7v7/DPP%20v%20Hill%

20and%20Kamay%20-%20Sentence.pdf.

When Kamay Met Hill: Organisational Ethics in Practice 781

123

interesting precedence in this regard, while also testing the

effectiveness of the current top-down approach to market

discipline. Under the top-down approach, national regula-

tion tends to drive ethical codes and rules at the institutional

level, but the extent of these is generally limited to those

practices that can actually attract regulatory penalties.

Financial market theory that focuses on the market

microstructure of how market participants operate, set

prices and execute trades gives some theoretical merit to

McGee’s (2008) view. Grossman and Stiglitz (1980), for

example, argue that in the absence of any profits arising

from the use of any informational advantage, there would

be no incentive for individuals to seek, analyse and trade

on information, as the market equilibrium would be such

that it would reveal any informational advantage to other

market participants. In other words, if there is no nonzero

expected profit arising from costly information gathering,

markets would fail (in effect a catch 22).

A key question, however, is where the informational

advantage actually comes from. In financial economics, mar-

kets are assumed efficient with the price impact of information

only considered by market participants upon its public release.

Thus, an economic advantage is achieved only through the

speed of reaction to new information, with financial interme-

diaries making considerable investment in the infrastructure

necessary for quick trading execution. The cost of this infras-

tructure, and especially the recent use of advanced technology

by high-frequency traders, is itself an impediment to market

access and places other investors at a persistent informational

disadvantage. Under these circumstances, Yadav (2016) con-

cludes that algorithmic traders can undermine market integrity

in a way similar to fraudulent insider traders.

On the whole, one can interpret the informational

advantage argument by distinguishing between insiders and

‘‘misappropriators’’, as in Engelen and Van Liederkerke

(2007). While the behaviour of true insiders can easily be

explained in an economic context, the same does not hold

for misappropriators whose actions are difficult to justify

on either moral or economic grounds. In this paper, we are

not discussing whether insider trading is unethical or not,

as numerous other authors have done so in the past (En-

gelen and Van Liederkerke 2007; McGee 2008, 2009;

O’Hara 2001; Werhane 1989). We simply take it to be an

unethical and unlawful practice and are predominantly

interested in the extent to which organisations succeed in

promoting and ensuring individual ethical behaviour.

Kamay and Hill’s Insider Trading Scheme

Lukas Kamay and Christopher Hill graduated from Monash

University in Melbourne, Australia, but pursued indepen-

dent careers. Following graduation, Hill joined the time

series department of ABS. Kamay worked in financial

markets and eventually landed a job in the Melbourne

Treasury of NAB, one of the four major banks in Australia

and a leading bank worldwide. He was very successful and

promoted within two years to Associate Director. He had a

less privileged background than Hill, and his ambition to

succeed was well known among his colleagues. The two

met in May 2013 at a birthday party and hatched the

trading scheme that would become their undoing. A

timeline of their meeting and subsequent events is provided

in Table 1.

The pair’s insider trading scheme was simple but effec-

tive: Hill would surreptitiously obtain pre-release ABS data

on Labour Force, Retail Trade, Building Approvals and

Private Capital Expenditures, which he was technically not

permissioned to access but were known to affect the AUD–

USD exchange rate. 6 He would then pass the statistics on to

Kamay, typically via a phone text message.

Kamay initially setup one and then another account with

the broker Pepperstone in August and September 2013. He

then set up separate accounts with the broker Axicorp in

February and May 2014, but kept these accounts secret

from Hill. Table 2 provides a detailed account of Kamay’s

trades on the pre-release ABS statistics. Overall, he exe-

cuted 45 speculative trades on AUD–USD margin FX

contracts on 22 days spanning the period September 2013

to May 2014. Not all of his trades were profitable, with

some designed to lose money and therefore give the

appearance to the brokers that his trading behaviour was

normal and success based on luck. Hill was not aware of

most of the trading and thought that only small profits were

being obtained. He received only two modest payments

from Kamay: A$13,000 in December 2013 and A$6500 in

April 2014. He was therefore surprised to learn that

Kamay’s trades had in fact produced gross profits in excess

of A$8 million. 7

Kamay was careful to both mask his activities and avoid

trading when interfering news flows were expected to

emanate from other markets. For example, late morning

ABS data releases often overlap with releases of economic

data by China and Japan, Australia’s two main trading

6 See http://www.rba.gov.au/mkt-operations/ex-rate-rba-role-fx-mkt.

html for a discussion on economic factors that affect the AUD–USD

exchange rate. 7 Kamay was sentenced to seven years and three months, while Hill

to three years and three months. Hill received a lower sentence

because he had not been aware of the scope and profitability of

Kamay’s trading activity. The two had agreed in May 2013 that the

trading would occur over 12 months with the aim of making just

AUD200,000. This gross amount would have translated to an after-tax

profit of AUD50,000 for each, since Kamay had the accounts in his

name and had a marginal tax rate of 50%. Interestingly, had they

stuck to the original agreement the trading scheme would likely never

have been detected.

782 J. A. Batten et al.

123

partners. However, China and Japan publish key release

dates in advance, which Kamay made sure to avoid when

timing his trades. Kamay executed trades as close as pos-

sible to the times of the ABS data releases, and carefully

timed reversals of his positions to maximise profits.

The technical paper of Batten et al. (2015) shows that

Kamay was successful in making sure that his trades had

no detectable impact on the AUD–USD exchange rate. The

paper uses an asset-pricing framework (Solnik 1977; Stulz

1981; Bekaert and Harvey 1995) to compare the exchange

rate’s intraday volatility and excess returns on days when

Kamay traded versus other news days and days without

news. The results depict a strategic trading behaviour by

Kamay that is consistent with the insider trading behaviour

previously documented by Frino et al. (2013), Korczak

et al. (2010) and McInish et al. (2011). Kamay’s trading on

ABS release dates of high market volatility is also con-

sistent with traditional financial market theory, which

postulates that insiders mask their actions by only trading

during periods of market turbulence (Kyle 1985; Frino

et al. 2013).

A Perspective on Insider Trading Rules and Regulations

International and National Rules

The broad regulatory context of the Kamay and Hill case is

the role of the financial system in the modern economy,

and the importance of monitoring the actions of individual

actors and participants associated with financial institu-

tions. While banks are just one of many institutions that

participate in the financial system, they are subjected to the

heaviest regulation and regulatory scrutiny due to their

Table 1 Timeline of events

Event Date Description Number of

trades

Paragraph

1 2007 K and H meet while studying economics and finance at Monash University, Melbourne

Australia

9

2 2011 K and H graduate from Monash University 10

3 2011 K employed by the National Australia Bank (NAB) in Melbourne on its wholesale front office

desk

11

4 2011 H employed by the Australian Bureau of Statistics (ABS) 12

5 2013 At a chance meeting in May K and H come up with plan to trade on pre-release ABS data. 13

6 2013 On August 8, K opens trading account 1 with Pepperstone, a foreign exchange contract

provider, to trade margin foreign exchange (FX) contracts

16

7 2013–2014 On September 12 to May 8, K trades 21 margin FX contracts through Pepperstone account 1.

Sixteen trades make profits of A$284,000, and five make deliberate losses of A$195,000

21 18

8 2013 On September 2, K opens trading account 2 at Pepperstone. K keeps the account secret from H 19

9 2013–2014 K trades 13 margin FX contracts through Pepperstone account 2. The trades make profits of

A$970,000 and deliberate losses of A$14,000

13 19

10 2014 K opens trading accounts 3 and 4 with another broker Axicorp 20

11 2014 On February 3 to 13, K trades three margin FX contracts through Axicorp accounts 3 and 4. The

trades make profits of A$601,000

3 21

12 2014 On February 27 to May 8, K trades eight margin FX contracts through Axicorp accounts 3 and

4. The trades make profits of A$5,372,000, with two trades making deliberate losses of

A$816,000

8 22

13 2014 Pepperstone and Axicorp file reports with the Australian Securities and Investments Corporation

(ASIC) under mandatory reporting requirements of suspected insider trading on February 19

and 20, respectively

30

14 2014 The Australian Federal Police and ASIC begin a joint investigation on February 21, but allow

trading to continue to gather sufficient evidence to mount a successful prosecution. On May 9,

search warrants are issued, and Kamay and Hill are arrested

31

15 2014 Joel Murphy, Head of Sales at Pepperstone who alerted ASIC to the trades, is sacked on May 9.

He is currently suing Pepperstone for unfair dismissal a

Paragraph is the paragraph reference from CDPP v Hill and Kamay 2015 VSC 86. H is Christopher Russell Hill, K is Lukas James Kamay.

Kamay executed a total of 45 margin FX trades: 34 through Pepperstone Financial Pty Ltd and 11 through AxiCorp Financial Services Pty Ltd a http://www.heraldsun.com.au/news/law-order/employer-wont-back-down-over-insider-trading-sacking/story-fni0fee2-1227037855024

When Kamay Met Hill: Organisational Ethics in Practice 783

123

systemic role in providing leverage and trading risk

exposures. While international banks have organisational

units capable of monitoring in-house trading, the sheer size

of their positions warrants particular regulatory attention.

These points are discussed in detail by the International

Competition Network (ICN), which notes that regulatory

reform has become more focused on the importance of

maintaining competition (ICN 2005).

Insider trading and market manipulation are of particular

regulatory concern and attention. Regulatory principles are

embodied in the guidance on corruption by the United

Nations (UN) and other international organisations, which

loosely refer to ‘‘the abuse of entrusted power for private

gain—not only financial gain but also non-financial

advantages’’ (Transparency International; UN Global

Compact). Other institutions such as the World Bank also

attempt to operationalise regulatory oversight by scoring

countries in terms of regulatory quality and other gover-

nance indicators. 8 More specific to our paper is the current

initiative of the Bank for International Settlements to issue

a global code for foreign exchange market conduct. The

BIS’ Foreign Exchange Market Group completed the first

phase of establishing a global code in May 2016, with the

complete code and adherence mechanisms to be released in

May 2017. While rules directly related to insider trading

are not mentioned in the current draft, there are detailed

Table 2 Australian Bureau of Statistics (ABS) data release dates and Kamay’s pre-release trades

ABS data Labour force

(Cat. 6202)

Retail trade

(Cat. 8501)

Building

approvals

(Cat. 8731)

Private capital

expenditure

(Cat. 5625)

RBA Net news

days

(N = 67)

Trade days c

(N = 22)

17/01/13 09/01/13 10/01/13 3 0

07/02/13 06/02/13 04/02/13 28/02/13 05/02/13 5 0

14/03/13 05/03/13 04/03/13 05/03/13 3 0

11/04/13 04/04/13 04/04/13 02/04/13 3 0

09/05/13 06/05/13 02/05/13 07/05/13 4 0

13/06/13 03/06/13 30/05/13 30/5/13 04/06/13 4 0

11/07/13 03/07/13 04/07/13 02/07/13 4 0

08/08/13 a

05/08/13 a

30/07/13 29/08/13 06/08/13 5 0 b

12/09/13 a

03/09/13 a

02/09/13 03/09/13 3 2

10/10/13 a

01/10/13 a

02/10/13 a

01/10/13 3 3

07/11/13 a

04/11/13 a

31/10/13 a

28/11/13 05/11/13 5 3

12/12/13 a

03/12/13 02/12/13 a

03/12/13 3 2

16/01/14 09/01/14 09/01/14 2 0

13/02/14 a

06/02/14 a

03/02/14 a

27/02/14 a

04/02/14 5 4

13/03/14 a

06/03/14 a

04/03/14 04/03/14 3 2

10/04/14 a

03/04/14 a

02/04/14 a

01/04/14 4 3

08/05/14 a

07/05/14 a

05/05/14 a

29/05/14 06/05/14 5 3

12/06/14 03/06/14 02/06/14 03/06/14 3 0

Hill data release to Kamay a (N = 24) 9 8 6 1

Relevant news events (N = 76) 18 18 18 6 16

ABS is Australian Bureau of Statistics. RBA is relevant Reserve Bank of Australia Statement on Monetary Policy, typically made after ABS data

release, termed ‘‘Statement by Glenn Stevens, Governor: Monetary Policy Decision’’

ABS data as specified in CDPP v Hill and Kamay (2015) VSC 86 paragraph 32

Net news days are the net days in each of the event rows. Trade days are the number of actual trade days in the event rows; trading only took

place when the relevant pre-release data were the only news event on that day

ABS release times are 11:30 a.m. Australian Eastern Time. There were 40 relevant ABS releases and 11 RBA meetings over the trading period,

for a total of 51 events. Some of these overlap a Trade dates are those dates that both match the evidence provided by CDPP v Hill and Kamay (2015) VSC 86 and those trades made to avoid

overlap with RBA monetary policy decisions, which occur early in the month b Hill released data to Kamay but the relevant accounts were not opened until August 9, 2013

c A total of 45 trades were made over these days: 21 trades were made using the Pepperstone account 1 (12 September 2013 to 8 May 2014).

Thirteen trades were made using the Pepperstone account 2 (12 September 2013 to 27 February 2014). Three trades were made using the

AxiCorp account 1 (3 to 13 February 2014). Eight trades were made using the AxiCorp account 2 (27 February to 8 May 2014)

8 http://info.worldbank.org/governance/wgi/index.aspx#faq-2.

784 J. A. Batten et al.

123

comments on information sharing. For example, the third

guiding principle states that ‘‘Market participants are

expected to be clear and accurate in their communications

and to protect confidential information to promote effective

communication that supports a robust, fair, open, liquid and

appropriately transparent FX Market’’ (BIS 2016b: 3).

National legislation includes ‘‘umbrella’’ rules covering

insider trading and consumer protection laws. In Australia,

there are two main financial market regulators equivalent to

the central bank and securities markets regulator present in

most developed economies. The Reserve Bank of Australia

(RBA) conducts monetary policy with the objective of

ensuring AUD stability and monitors licenses trading banks

to maintain a strong financial system. 9 Securities markets

violations, which include insider trading and market

manipulation, are the domain of the Australian Securities

and Investments Corporation (ASIC). The prosecution of

Kamay and Hill only involved the ASIC, because their

trading scheme, while profitable, did not destabilise the

currency given the enormous sums traded in foreign

exchange markets. 10

The ASIC requires mandatory reporting by financial

market participants of suspected insider trading. The rele-

vant regulation RG 238.14 states, ‘‘We do not expect a

market participant to actively seek to detect reportable mat-

ters for the purposes of Rule 5.11.1. Rather, the rule requires

market participants to report activity they become aware of

in the ordinary course of their client and proprietary trading

activities’’. 11

As noted previously, in the Kamay and Hill case it was

Kamay’s brokers that reported what was thought to be

trading irregularities. Although this paper does not directly

address this issue, one particular concern with the existing

normative structure of rules and standards is the difficult

process of monitoring. A critical problem highlighted by

the Kamay and Hill case is how regulators should monitor

trading in opaque OTC markets, including cash-based

foreign exchange markets and dependent derivatives mar-

kets. In exchange-based stock markets, abnormal trading

typically associated with insider trading can be captured

using computer-based search algorithms (see Olmo et al.

2011). For OTC markets, however, no such application of

technology currently exists. It is also important to point out

that while there has been a convergence in insider trading

rules internationally, there remains significant variation in

both rules and their enforcement across countries, despite

the clear economic benefits accrued (Beny 2007; Steinberg

2003).

Institutional and Organisational Rules

and Regulations

The internal ethical codes and rules of financial institutions

within national systems are based on both national regu-

lations and rules issued by industry organisations such as

the national Australian Bankers Association (ABA) and the

international Chartered Financial Analyst (CFA) Institute.

These rules reflect key ethical concepts of justice, duty and

responsibility, and are expressed at both the corporate and

industry levels in terms of specific ethical policies and

principles.

The CFA Code of Ethics and Standards of Professional

Conduct has six core principles, including acting with

integrity, competence, diligence and respect with the

public, clients and prospective clients; acting in an ethical

manner that reflects credit on the investment professional

and the investment profession; and promoting the integrity

of and upholding the rules of capital markets. 12

The ABA

Code of Banking Practice has four key areas that does not

specifically refer to market integrity, but more broadly to

key commitments and general obligations associated with

banking services and practices, while acknowledging a

general duty of confidentiality. 13

In Kamay and Hill’s case, both their employers had

strict hiring procedures and set high ethical standards for

their employees. For example, ABS had a clear policy on

the use of private information (see ‘‘Appendix’’), while

NAB made clear statements on the importance of meeting

legal and regulatory obligations and acting with honesty

and integrity. 14

Importantly, however, neither employer

was successful deterring unethical behaviour. For example,

Kamay argued for diminished responsibility due to the

aggressive money-making culture in NAB’s Treasury. This

argument was not well-received by the Australian court,

which suggested that higher standards should always apply.

Statman (2009) nonetheless shows that culture not only

influences behaviour but also perceptions of fairness and

context. Thus, in some countries Kamay and Hill’s actions

may not be considered unfair and might even be considered

acceptable. Certainly, there are significant differences

internationally in the extent of ethical enforcement (Beny

2007).

9 http://www.rba.gov.au/about-rba/our-role.html.

10 The ASIC has investigated a number of suspected cases of insider

trading on key economic news, http://www.smh.com.au/national/rba-

interest-rate-decisions-and-australian-dollar-movements-20150411-

1mj6cj.html. 11

ASIC Regulatory Guide 238 (2013), http://download.asic.gov.au/

media/1247093/rg238.pdf.

12 https://www.cfainstitute.org/ethics/codes/Pages/index.aspx.

13 http://www.bankers.asn.au/industry-standards/ABAs-code-of-bank

ing-practice. 14

https://www.nab.com.au/content/dam/nabrwd/About-Us/national-

australia-bank-code-of-conduct.pdf.

When Kamay Met Hill: Organisational Ethics in Practice 785

123

In order to better understand the role of culture in

affecting individual ethical standards, it is important to

understand how individuals interact in hierarchies and the

agency issues that can arise as a result. In economics, the

agency problem may be interpreted as a lack of loyalty. In

social psychology, however, the agency problem is related

to excessive loyalty. This distinction is important because

it shows that compliance is rooted in the notion of

rationality and consequence-based decision making. As the

experimental evidence of Milgram (1974) shows, humans

‘‘suffer’’ from excessive loyalty to authority, or what he

refers to as ‘‘agentic shift’’. Of course, as long as we

recognise the rule of law and compliance as the basis for

authority, then compliance will be effective—and even too

effective in the sense that it will not even be questioned.

Importantly, there are circumstances in which the role of

authority can actually be taken over by culture at the cor-

porate, departmental, or even smaller group level. If this

culture is in stark contrast to societal norms, it can

encourage the unethical behaviour of individuals by means

of excessive loyalty. Milgram also explores how mitigating

such behaviour requires rivalling authority, absent author-

ity and dissenting peers. Morck (2008) discusses how to

introduce these concepts in corporations from the per-

spective of corporate governance. These approaches pro-

vide solutions for changing organisational culture to allow

greater individual expression.

There is also an important role to be played by educa-

tional organisations in introducing students to ethical

concepts, in the event that they have not been exposed to

them previously, and reinforcing existing personal or

individual ethical codes and norms. While there is a debate

on whether ethics can be taught, educational organisations

in recent years have modified curricula and introduced

ethics courses (Oates and Dias 2016). Monash University

in Melbourne, where the pair graduated, also has clear

guidelines on ethical practice 15

and consciously tries to

install the importance of ethics and ethical conduct in its

business and economics graduates through teaching and

learning. 16

These objectives are broadly in line with the

UN’s Principles for Responsible Management Education

(PRME) initiative, which was launched in 2007 as part of

the UN Global Compact initiative, and which Monash

Business School joined in 2009. Given that Kamay and Hill

graduated in 2011, they are certain to have been exposed to

the importance of ethics and ethical conduct both formally

and practically, interwoven in Monash University’s cur-

ricula, during their undergraduate education.

In summary, the Kamay and Hill case is important

because it represents an obvious breakdown in the educa-

tion and socialisation process of financial market profes-

sionals. The pair were presented with many examples of

ethics and ethical principles during their education and

subsequent professional careers at the organisational,

industry, national as well as international level. While they

both showed remorse for their actions during prosecution,

they had perceived their insider trading scheme as a game

without consequence. That it should be made clear to a

younger generation that crime does have consequence was

emphasised by the court and used as justification for the

severity of the pair’s sentencing, especially for Kamay.

These issues are discussed in the next section, where we

present three stylised models of stakeholder relationships

in terms of independent and interdependent linkages

between ethical norms, rules and regulation.

Stylised Models on Linkages Between Ethical Norms, Rules and Regulation

Kamay and Hill’s insider trading actions closely resembled

those typically taken by corporate insiders, who normally

exploit positive rather than negative news and use their

informational advantage to both maximise profits and

minimise risk (Lee et al. 2014). As evidenced by the low

number of insider trading prosecutions even in exchange-

based stock markets, such deeds are hard to catch. If so, the

prevention of insider trading should transcend the imposi-

tion of penalties, with consideration also given to how

ethics is managed within the firm and how ethical beha-

viour is encouraged and implemented at home, in school

and in society more generally. We now attempt to articu-

late this critical issue in an ethical framework, which

emphasises the importance of ethical practice being rein-

forced both at the corporate and the societal level. Clearly,

one needs to do more than just rely on insider trading

regulation and its enforcement.

We show three stylised models depicting the interplay

between individual, firm, industry and national/societal

ethical principles, as well as related rules and regulations

on insider trading.

Figure 1 illustrates a concentric system of nested stan-

dards, which are centralised and where channels link

international and national rules, laws and religious stan-

dards. National standards and ethical principles then reflect

directly into industry and firm-level codes and standards.

This likely represents the current status quo of insider

trading laws and rules. In Australia, for example, insider

trading regulation has converged with international stan-

dards, which are in turn imposed on industry- and firm-

level codes and standards. Personal beliefs and morals sit

15 http://adm.monash.edu/workplace-policy/ethics/.

16 http://adm.monash.edu/human-resources/ethics/ethics-statement-web.

pdf.

786 J. A. Batten et al.

123

nested within this framework. Importantly, industry- and

firm-level codes and standards reflect national laws with no

obvious intent to transcend them.

It is important that this hierarchy of rules also dictates

personal beliefs, and while there may be some feedback

from personal beliefs into the hierarchy, it is unlikely that

the beliefs can be interpreted. Such a rigid system of

compliance requires constant monitoring and policing and

leads to failure when monitoring is not maintained. In fact,

the system is based on the predisposition that individuals

are unlikely to behave ethically (or comply), hence the

need for the overwhelming complexity in regulation and

rules. This by itself raises the issue that what we generally

describe and/or think of as ethics is in fact simply a

taxonomy of compliance—i.e. teaching, codifying and

telling individuals what they need to follow in order to

conform to a minimum set of standards. Under such as

setting, individual responsibility and ethical judgement are

abdicated in favour of rule adherence. The Kamay and Hill

case and other recent financial market scandals are exam-

ples of when monitoring (compliance) was either inade-

quate or simply not undertaken, as would occur when a

firm has failed to enact national regulation through insuf-

ficient internal controls.

Figure 2 highlights the evolution of the system towards

well-developed law and governance frameworks in the

spirit of La Porta et al. (1998). These systems are inde-

pendent of legal perspectives (e.g. common vs. civil law

origin), and compliance is ensured by a strong and inde-

pendent judicial system as interpreted by the law and

finance literature (see Beny 2007). Here, personal, firm and

industry codes are all nested independently and non-in-

clusively within a broader set of national and international

rules and standards.

The problem in Fig. 2 is obvious: transmission channels

are undirected, and there is little scope for development or

evolution based on interaction and learning. There is also

the potential for conflict between international and national

regulations and the rules imposed by industry organisa-

tions. For an example one needs to go no further than the

ethics rules of the British Bankers Association (BBA), and

the failure of these rules to curtail both the individual and

institutional sanctioned breaches of trust associated with

the recent London Interbank Offered Rate (LIBOR) scan-

dal. Note that as a result of this scandal, there has been a

progression to the supervision of LIBOR rates by national

regulators (see Hou and Skeie 2014).

It is of course not surprising that national regulators rely

on industry self-regulation, especially in opaque OTC

markets where regulatory monitoring is difficult. However,

the Kamay and Hill case also highlights both the strength

and the weakness of this approach. While Kamay and Hill

were ultimately convicted, had they executed their trans-

actions more carefully (for example, through offshore

rather than domestic brokers), they would likely never have

been detected. Therefore, where present, industry rules

need to complement those imposed at the national level,

and even transcend them under circumstances where

national regulation is inefficient or inadequate (Beny

2007).

We argue that the interdependent ethical, moral and

legal framework shown in Fig. 3 is the best suited for the

prevention of illegal insider trading. Here, a core set of

shared principles at the national, industry, firm and indi-

vidual levels provides a conceptual structure to a broader

set of rules, laws and principles. In this setting, responsivity

is not entirely abdicated, and individual judgement and

Fig. 1 Stylised centralised ethical, moral and legal structure. Exam- ples of relevant ethical rules and guidelines related to insider trading:

(A) International ethical codes: FX Global Code (BIS 2016b); UN

Global Compact with reference to integrity and corruption; Trans-

parency International’s Code of Conduct for Corporations. https://

www.unglobalcompact.org/about/integrity-measures, http://www.

transparency.org/whatwedo/answer/code_of_ethics_for_companies_

good_practices_and_resources. (B) National regulation in Australia:

Corporations Amendment (Financial Market Supervision) Act 2010

provides market integrity rules; Privacy Act 1988 provides the gen-

eral duty of confidentiality. (C) Industry codes of conduct: FX Global

Code (BIS 2016b); CFA Code of Ethics and Standards of Professional

Conduct; ABA Code of Banking Practice. https://www.cfainstitute.

org/ethics/codes/Pages/index.aspx, http://www.bankers.asn.au/indus

try-standards/ABAs-code-of-banking-practice. (D) Firm-specific

codes: There may be firm-level strategic and policy statements on the

need for corporate social responsibility and the need for stakeholder

engagement. Corporate policy may include a number of relevant

dimensions including the need for transparency and disclosure; the

presence of internal and external audits; whistle-blowing rules and

specific internal controls (compliance) that address trading and risk

shifting (transfer pricing). In the case of the NAB Code of Conduct

(Section 8) there is specific reference to the need to ‘‘ensure that our

conduct in business ensures that we treat customers fairly and that we

help safeguard market integrity’’. https://www.nab.com.au/content/

dam/nabrwd/About-Us/national-australia-bank-code-of-conduct.pdf

When Kamay Met Hill: Organisational Ethics in Practice 787

123

duty is sharpened by the presence of rules that translate into

higher ethical principles and standards. The system is

inclusive and, since there are shared principles, tolerant in a

way that allows for sharing and individual expression. How

best to achieve such an interdependent structure remains a

challenge for financial markets and those institutions and

individuals that operate within them.

A key problem that remains is that the current focus on

institutions, laws and codes reflects the prevailing attitude

of modern (neoclassical) economic theory that markets are

well functioning and possess self-correcting mechanisms

that always get things right even if individuals get them

wrong. Nonetheless, given the heterogeneity of individual

beliefs, norms and biases in establishing ethical systems

and policy, there is a need to first recognise and articulate

commonalities as well as differences, while modifying and

reinterpreting policy in response to individual feedback. In

the absence of such a consideration, setting up rules and

compliance is the only viable course of action.

The agency problem, as described in economics and

finance, is based on Jensen and Meckling’s (1976) well-

known principal-agent theme where rules and compliance

are focused on the lack of loyalty. The Kamay and Hill

Fig. 2 Stylised independent ethical, moral and legal structure. Examples of relevant ethical rules and guidelines related to insider

trading: (A) International ethical codes: FX Global Code (BIS 2016b);

UN Global Compact with reference to integrity and corruption;

Transparency International’s Code of Conduct for Corporations.

https://www.unglobalcompact.org/about/integrity-measures, http://

www.transparency.org/whatwedo/answer/code_of_ethics_for_compa

nies_good_practices_and_resources. (B) National regulation in Aus-

tralia: Corporations Amendment (Financial Market Supervision) Act

2010 provides market integrity rules; Privacy Act 1988 provides the

general duty of confidentiality. (C) Industry codes of conduct: FX

Global Code (BIS 2016b); CFA Code of Ethics and Standards of

Professional Conduct; ABA Code of Banking Practice. https://www.

cfainstitute.org/ethics/codes/Pages/index.aspx, http://www.bankers.

asn.au/industry-standards/ABAs-code-of-banking-practice. (D) Firm-

specific codes: There may be firm-level strategic and policy state-

ments on the need for corporate social responsibility and the need for

stakeholder engagement. Corporate policy may include a number of

relevant dimensions including the need for transparency and disclo-

sure; the presence of internal and external audits; whistle-blowing

rules and specific internal controls (compliance) that address trading

and risk shifting (transfer pricing). In the case of the NAB Code of

Conduct (Section 8) there is specific reference to the need to ‘‘ensure

that our conduct in business ensures that we treat customers fairly and

that we help safeguard market integrity’’. https://www.nab.com.au/

content/dam/nabrwd/About-Us/national-australia-bank-code-of-con

duct.pdf

Fig. 3 Interdependent ethical, moral and legal structure. The inter- dependent structure is centred on core ethical values that support, or

underpin, an overlapping and interconnected structure of personal,

firm and industry-level beliefs. There is interaction and adjustment.

Examples of relevant ethical rules and guidelines related to insider

trading: (A) International ethical codes: FX Global Code (BIS 2016b);

UN Global Compact with reference to integrity and corruption;

Transparency International’s Code of Conduct for Corporations.

https://www.unglobalcompact.org/about/integrity-measures, http://

www.transparency.org/whatwedo/answer/code_of_ethics_for_compa

nies_good_practices_and_resources. (B) National regulation in Aus-

tralia: Corporations Amendment (Financial Market Supervision) Act

2010 provides market integrity rules; Privacy Act 1988 provides the

general duty of confidentiality. (C) Industry codes of conduct: FX

Global Code (BIS 2016b); CFA Code of Ethics and Standards of

Professional Conduct; ABA Code of Banking Practice. https://www.

cfainstitute.org/ethics/codes/Pages/index.aspx, http://www.bankers.

asn.au/industry-standards/ABAs-code-of-banking-practice. (D) Firm-

specific codes: There may be firm-level strategic and policy state-

ments on the need for corporate social responsibility and the need for

stakeholder engagement. Corporate policy may include a number of

relevant dimensions including the need for transparency and disclo-

sure; the presence of internal and external audits; whistle-blowing

rules and specific internal controls (compliance) that address trading

and risk shifting (transfer pricing). In the case of the NAB Code of

Conduct (Section 8) there is specific reference to the need to ‘‘ensure

that our conduct in business ensures that we treat customers fairly and

that we help safeguard market integrity’’. https://www.nab.com.au/

content/dam/nabrwd/About-Us/national-australia-bank-code-of-con

duct.pdf

788 J. A. Batten et al.

123

case and other recent financial scandals show that where

the attention is on the individual, it may well be the

organisational culture fostering excessively competitive

behaviour. We believe that these issues, as related to the

ethical behaviour of individuals, need to be addressed from

the bottom-up, starting with the individual to allow inter-

pretation further up the organisational hierarchy. The pre-

vailing top-down compliance-based approach is already

well-implemented, but often fails to ensure market integ-

rity. The issue remains as to how best to enable an effective

and balanced interaction between interpretations of ethics

and compliance of rules or norms.

The field of behavioural economics and finance can

provide clues as to how compliance can be structured,

promoted and executed when behavioural biases of indi-

viduals are considered. For example, individuals respond

differently to positive and negative framing of rules and

codes, and consider their responsibilities differently when

completely bounded by rules as opposed to given more

latitude and accountability. This perspective is proposed by

Langevoort (2016), who introduces the concept of beha-

vioural compliance and explains why and how a compli-

ance framework should ‘‘draw from a wider range of

behavioural predictions about individual and organisational

behaviour’’.

Conclusion

This paper has used the historic Kamay and Hill case of

foreign exchange insider trading in Australia to highlight

the many issues and problems involved in the prevention,

detection and prosecution of insider trading in financial

markets. What remains clear is that the current moral and

ethical system, responding in a top-down manner to insider

trading laws and their enforcement, needs to be improved.

A critical task is the propagation of ethical behaviour, not

only in terms of codes of conduct but also in terms of

embedding ethics in the culture of the firm. Ideally, the

legal, ethical and moral structures surrounding financial

markets should be interdependent and inclusive, while still

allowing for individual and corporate expression. This

approach in effect sees corporate policy as being at the

nexus of individual and national-international guidance. In

a centralised and hierarchical system where rules are nested

and layered, individuals likely become overwhelmed and

feel disconnected from the policy setting process.

Our review of the insider trading literature has empha-

sised the importance of both international and domestic

rules, and that of industry regulations and sanctions.

International differences in insider trading regulation and

enforcement impose a challenge to establishing universal

rules and principles that can be taught in schools. The need

for industry-based monitoring is obvious given the scale,

scope and economic importance of financial markets today.

In the context of education, the question is whether

ethics can really be instilled in individuals at the level of

tertiary education. Firstly, it seems that what is currently

taught is essentially compliance with laws, regulations and

corporate codes of conduct and ethical policy. The role of

individual judgement and responsibility remains ambigu-

ous, with little scope for individual interpretation of ethical

norms and principles. Secondly, raising these issues so late

in the life of an individual may be inappropriate. Previous

research shows, for example, that the ethicality of univer-

sity students is heavily affected by gender, age, religious

beliefs and interpersonal competitiveness (Terpstra et al.

1993). The Kamay and Hill case has nevertheless shown

two individuals with distinctly different social backgrounds

colluding in the same unethical undertaking. In other

words, the seeds of their opportunistic deeds were likely

planted earlier in life, and changing them through educa-

tion may be difficult, if not impossible.

The psychological traits of an individual seem to play an

important role in ethical behaviour and may bias the

individual’s choice of professional vocation. Brown et al.

(2010), for example, show that more empathetic and less

narcissistic individuals are more likely to make ethical

decisions. They further demonstrate that finance majors

tend to be less empathetic and more narcissistic, i.e. are

less likely to act ethically all else equal. Even if an indi-

vidual emerges from the educational process with a ten-

dency towards ethical behaviour, whether they make

ethical decisions in their later professional careers will

likely be affected by the prevailing corporate and industry

culture.

Oates and Dias (2016) analyse the extent to which ethics

is included in the banking and finance programmes of

Australian business schools. They find that 34 out of 54

programmes include ethics, but only around 10 per cent

include ethics in all courses. They also find that little focus

is given to actual assessment on ethics.

Hence, it is vital to discuss what more, and how much

more, can be done at financial institutions in terms of

implementing and enforcing ethical codes and rules. The

key question is what responsibility firms should take in

terms of truly embedding ethics in their cultures, and how

far they should go in monitoring unethical behaviour in its

many manifestations. The credibility and authenticity of

ethical principles in the financial sector is difficult to pro-

mote at the firm (and market) level, especially in the wake

of the many scandals and market manipulation practices

that have become evident in recent years (e.g. LIBOR

fixing, gold fixing, foreign exchange fixing, warehousing

scandal, etc.).

When Kamay Met Hill: Organisational Ethics in Practice 789

123

This leads to the final question of whether it is possible

to have better financial institutions, and whether these

institutions and their agents are able to be better corporate

citizens despite the competitive culture they actively

encourage. The reality is that the financial system and its

participants have a preeminent role in the modern econ-

omy. It seems that the process of embedding ethics must

start strategically from the top and addressed at all levels of

the institution, by promoting an ethical culture while at the

same time severely deterring and penalising social mis-

conduct at both the individual and firm levels.

Good examples of sound ethical codes include the UN’s

PRME initiative in education, and the CFA Institute’s Code

of Ethics and Standards of Professional Conduct among

professional societies. However, much more needs to be

done at the firm level, where critical issues remain invisible

to public and public scrutiny. Only then will financial

institutions receive greater public credibility and, by doing

so, remove the central argument typically used by indi-

viduals to rationalise their own unethical behaviour. As

firms and markets are essentially run by people, this should

foster better ethical culture in the financial sector. Institu-

tions should also provide good examples (or role models)

for the promotion and integration of social responsibility

and broader concepts of ethical behaviour. This clearly

should start early in life, with attention given to estab-

lishing a core foundation of ethical principles and values

that will transcend, and integrate with, corporate, industry

and national perspectives.

The Kamay and Hill case highlights further issues in

preventing, detecting and prosecuting insider trading that

have not been discussed in detail in this paper. The pair

faced a complex charge of insider trading and identity

theft, and there was considerable discussion on the severity

of their sentencing. Certainly, the sentencing judge sought

to make the sentences unpleasant to dissuade others from

repeating the crime, stating ‘‘it is self-evident that the

longer the sentence, the harder the bite’’ (CDPP v Hill and

Kamay, 2015: 937). The sentences’ effectiveness in

deterring further insider trading remains to be seen.

Finally, it is important to place the Kamay and Hill case

and other examples of market failures in the context of the

broader activities of banks, especially with respect to

lending, financing and more recently their strong focus on

fee-based activities. A recent discussion provided by the

Fidelis International Institute highlights a large number of

ethical issues that the financial sector generally faces,

including the support of totalitarian regimes and

unscrupulous firms, or that of firms that leave a large

ecological footprint. 17

This suggests that while individual

trading behaviour is certainly important, it really is just one

of many issues that need to be addressed.

Acknowledgements This paper was first discussed at Monash University, Australia, in 2015. The authors wish to thank those who

shared their opinions and views on the actions of Christopher Hill and

Lukas Kamay, who are both Monash University alumni. We also like

to thank Aleksandr Gevorkyan, participants at the 22nd International

Vincentian Business Ethics Conference, Patrick Flanagan and three

anonymous referees for valuable comments and suggestions.

Appendix: Policy on Pre-embargo Access to ABS Statistical Releases

To ensure impartiality and integrity of ABS statistics, it is

standard ABS policy and practice to make all our statistical

releases available on our website to all government, com-

mercial and public users of our statistics, simultaneously,

from 11.30 a.m. (Canberra time) on the day of their

release. Prior to 11.30 a.m., all ABS statistics are treated as

confidential and regarded as ‘‘under embargo’’.

However, given the high level of market and community

interest in some statistical series, it is important from a

‘‘public good’’ perspective that key ministers are able to

respond in an informed manner to requests from the media

for early comment on the released statistics, thereby

avoiding any inadvertent misinterpretation. The ABS also

provides access for a range of authorised Wires service

providers.

For selected government agencies, a secure ‘‘lockup’’

facility is provided for both market sensitive and a small

number of other complex key ABS statistical releases. This

enables authorised government officials and ministerial staff

time to analyse the release and develop a briefing to be

provided to relevant ministers after lifting of the embargo.

Authorised persons attending a lockup are required to

remain in a secure room managed by ABS staff and are

prohibited from communicating any information from the

statistical release to anyone outside the room, until the

embargo is lifted at 11.30 a.m. (Canberra time). Attendees

at the lockup are also required to sign security undertakings

which include provision for prosecution under the Crimes

Act 1914 for anyone who breaches the conditions for

attending the lockup.

The following products are approved for provision to

authorised persons via ABS-hosted lockups on the morning

of the day of their release:

Balance of Payments and International Investment

Position, Australia—quarterly (cat. no. 5302.0)

Labour Force, Australia—monthly (cat. no. 6202.0)

Consumer Price Index, Australia—quarterly (cat. no.

6401.0)

17 http://www.fidelisinstitute.org/article.php?se=13&ca=22.

790 J. A. Batten et al.

123

Australian National Accounts: National Income,

Expenditure and Product—quarterly (cat. no. 5206.0)

International Trade in Goods and Services, Australia—

monthly (cat. no. 5368.0)

Housing Finance, Australia—monthly (cat. no. 5609.0)

Private New Capital Expenditure and Expected Expen-

diture, Australia—quarterly (cat. no. 5625.0)

Business Indicators, Australia—quarterly (cat. no.

5676.0)

Labour Price Index, Australia—quarterly (cat. no.

6345.0)

Producer Price Indexes, Australia—quarterly (cat. no.

6427.0)

Retail Trade, Australia—monthly (cat. no. 8501.0)

Building Approvals, Australia—monthly (cat. no.

8731.0)

Australian National Accounts: State Accounts—annual

(cat. no. 5220.0)

Recorded Crime—Victims, Australia—annual (cat. no.

4510.0)

Recorded Crime—Offenders—annual (cat. no. 4519.0)

Criminal Courts, Australia—annual (cat. no. 4513.0)

Crime Victimisation, Australia—annual (cat. no.

4530.0)—also previously known as Crime and Safety,

Australia (cat. no. 4509.0).

Construction Work Done, Australia, Preliminary—

quarterly (cat. no. 8755.0)

In addition to the above arrangements, and having

regard to the complexity of analyses required, a number of

Commonwealth Treasury officials have access to Aus-

tralian National Accounts: National Income, Expenditure

and Product (cat. no. 5206.0) early afternoon on the day

before its release.

In exceptional circumstances, approval may be given for

additional ad hoc lockups for other key statistical releases.

If possible, a public notice of intention to hold this lockup

will be published on the ABS website at least six working

days in advance of the event. If this is not possible notifi-

cation of an ad hoc, lockup will be made on the ABS

website as soon as possible.

The ABS also provides authorised Wires service pro-

viders with a shorter secure ‘‘lockup’’ to enable them to

prepare, referred to as the ‘‘Wires Preparation Service’’.

The Wires Preparation Service allows access to a limited

range of embargoed key statistical products (Category 1

and all but two Category 2 Main Economic Indicators, and

one Other Leading Indicator), to authorised Wires service

representatives in a secure environment at the ABS NSW

office, 44 Market Street, Sydney, 10 min prior to their

public release at 11:30 a.m., Canberra time. Wires service

providers are not permitted to release any material until the

embargo has been lifted at 11.30 a.m. Canberra time.

Access to statistics via the Wires Preparation Service is to

ensure market-sensitive material is accurately represented

at the time of public release. It is not intended to facilitate

more comprehensive analyses of the statistics; such anal-

yses may be conducted after the embargo is lifted at

11:30 a.m., Canberra time.

The following Wires service providers attend the Wires

Preparation Service:

Need To Know

Selerity

Market News International

Thomson Reuters

Dow Jones Newswires

Bloomberg News

AAP.

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