ASIC eDiscovery Blunder In Citibank Investigation
ASIC eDiscovery Blunder In Citibank Investigation
Month Date, 2006: ASIC is facing a potentially embarrassing situation after requesting a batch of emails relating to an investigation of insider trading at the Australian arm of Citigroup during Toll’s $5 billion takeover bid of Patricks.
The Herald today reported a “typographical” error led ASIC to request the wrong period of communications by Citigroup sent across Bloomberg’s instant messaging service. ASIC was only entitled to request access to documents across a one month period around August 19, 2005 – the date of the alleged improper trading. The problem for ASIC is it had accidentally requested documents across a 13 month period: August 2005 to September 2006 rather than August 2005 to September 2005. ASIC realised the mistake two days after receiving the information from Bloomberg.
The investigation by the corporate watchdog centres on Citibank’s trading desk activities during Toll’s $5 billion take over of Patricks in August 2005. Citibank had also been playing an advisory role to Toll during the takeover.
A day prior to the announcement of the takeover bid, Citibank’s trading desk had commenced a spending spree on Patricks’ shares. According to ASIC’s statement of claim, reported in the Herald in April 2006, by this stage it was in Citibank’s interest for the price of Patricks’ shares to increase.
ASIC initiated the investigation in April 2006, with Citibank’s alleged actions set to be a landmark case for new laws introduced to put restrictions on insider trading.
The mechanism put in place is referred to as a “Chinese wall” and is designed to put a barrier between investor trading desks and advisory services supplied by the same institution. In its initial statement of claim ASIC believed Citibank did not have the correct protocols in place to manage this requirement.
ASIC has been able to keep copies of Citibank’s emails as well as instant message sourced from Bloomberg for the period it had been granted, but has been denied copies for the full period it had inadvertently requested.
A spokesperson for ASIC told IDM that until it had substantiated the alleged error reported by the Herald it was unwilling to comment.
With the growing use of instant messaging for business - a trend currently more predominant in the US than in Australia – the case highlights not only the importance of archiving of documents conducted by the organisation itself, but the potential risk associated with third party communication providers such as Bloomberg. It can only be speculated whether Citibank would have provided the information for the 13 month period if it had held the information.