ABSTRACT
This chapter examines the most important and relevant defence for corporations – that of the Chinese Wall. The Corporations Act provides a variety of exceptions and defences to the offence of insider trading. The defence most applicable to corporations is that of the Chinese Wall, which allows a corporation to avoid liability for insider trading which might otherwise arise if the corporation can demonstrate, amongst other things, that it has a sufficient Chinese Wall in place. The first documented use of a Chinese Wall in relation to insider trading occurred in the United States, as a settlement device in the case of Re Merrill Lynch, Pierce, Fenner and Smith, Inc. In addition to operating as a means of avoiding liability for insider trading, Chinese Walls may also prevent insider trading from occurring, by restricting access to inside information to employees on the ‘public side’ of organisations.
