Introducing personal liability under the continuous disclosure regime : The essentials and non-essentials

Under the Federal Government's CLERP 9 legislation, expected at the time of writing to come into force in July 2004, personal liability will be introduced for the first time under the continuous disclosure regime. Individuals who are 'involved' in a failure to immediately disclose materially price sensitive information to the market will be subject to a civil penalty, in addition to the company being liable. According to the author, the introduction of personal liability per se is not contentious and indeed is a favourable change; what is questionable, however, is whether 'involvement' in a contravention is the appropriate test for imposing personal liability in relation to breaches of the continuous disclosure provisions. Based on the case law to date on the meaning of 'involved', there is particular uncertainty as to whether an individual would need to have actual knowledge that non-disclosed information is 'materially price sensitive' in order to satisfy the test of 'involved' in the context of continuous disclosure, or whether mere knowledge that the information has not been disclosed would be sufficient. This uncertainty arises due to the vague concept of 'essential matters' which the courts have developed as a test for what degree of knowledge a person needs to have in order to be 'involved'. The author argues that all the confusion as to what 'involved' means could be addressed by removing the word 'essential' from the dialogue, so that the test of 'involvement' would simply be based on whether the particular person had actual knowledge of each of the factual elements constituting the offence.