Citigroup Ruling – Implications For Letters Of Engagement And Insider Trading

The much anticipated Australian Federal Court decision handed down on 28 June cleared one of the world’s leading banks of insider trading and conflict of interest charges and in doing so clarified the approach that Australian courts will take when considering whether or not a fiduciary duty exists between two commercial entities.

Facts

Citibank Global Markets Australia Pty Ltd (Citigroup) is the Australian arm of the global financial company Citigroup Inc. Because its Australian business includes both investment banking and equities trading, Citigroup had established ‘Chinese walls’ to restrict the information flowing between its various departments. The existence of such Chinese walls is acceptable under Australian law as a means of preventing the flow of information across the different divisions of companies.