Section 1041A of the
Corporations Act (2001) provides that a person must not take part in, or carry out, a transaction (or two or more transactions) that are likely to have the effect of creating an artificial price for trading in financial products on a financial market operated in Australia. The concept of an 'artificial price' is not defined in the 2001 Act but, for the first time, the Federal Court provided a definition yesterday in
Australian Securities & Investments Commission v Soust [2010] FCA 68. The trial judge, Goldberg J., held (at paras 90 - 91):
I consider that the expression 'artificial price' in s 1041A connotes a price created not for the purpose of implementing or consummating a transaction between genuine parties wishing to buy and sell securities, but rather for a purpose unrelated to achieving the outcome of the interplay of genuine market forces of supply and demand ... It is fundamental to the working of the free market forces of securities exchanges such as the ASX that buyers are concerned to buy securities at the lowest possible price and sellers are concerned to achieve the highest possible price. Any different approach to the price for which securities are traded is a distortion of the interplay of the open market forces of supply and demand ..."
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