Analysts involved in the Newcrest secret briefing saga could face years in jail if the corporate watchdog decided to take them to court.
Newcrest will pay at least $1.2 million in fines, admitting it failed continuous disclosure laws after the miner briefed analysts on its market position before making a public announcement.
The Australian Securities and Investments Commission had been investigating Newcrest’s conduct around disclosure rules regarding market-sensitive information.
The miner’s shares fell more than 12 per cent in the lead up the announcement.
It has been revealed 40 million shares valued at around $660 million were traded during the time the private briefings were being held, this has led ASIC to believe some analysts were acting on the information before it was made public.
The Australian Financial Review said if individual analysts are taken to court they face fines of up to $800,000 and ten year hail terms.
Under a settlement proposed in the Federal Court, ASIC and Newcrest agreed to an amount of $1.2 million as a penalty.
The settlement reveals details of the briefing saga, and shows that from May 28, Newcrest briefed analysts from various investment banks including Credit Suisse, Bank of America Merrill Lynch, Macquarie, RBC Capital, Colonial First State and Morgan Stanley in order to ''nudge'' their forecasts lower to meet the company's new production and cost expectations.
Company emails reveal the briefings were aimed at getting analysts “in the ball park” of the new figures before a public announcement was made.
''I had conversations with BAML and Credit Suisse today, since both were preparing to publish,'' Newcrest’s former investor relations manager Spencer Cole said in one email.
''The real question is when I will have some more detail on the budget to help guide them in the right direction on costs as well as production''.
In separate communications Cole said gold production was understood to be closer to 2.25 million ounces, which meant ''we need to get [analysts] much lower''.
In a joint submission to the court, Newcrest and ASIC agreed on a $800,000 fine for the first contravention relating to gold production, and $400,000 for the second contravention relating to capital expenditure.
Newcrest said ASIC had not alleged the company had knowingly or intentionally contravened its continuous disclosure obligations.
Newcrest chairman, Peter Hay, said the company takes its disclosure obligations very seriously and sincerely regrets the contraventions.
Hay said an internal review had prompted the company to make changes in order to enhance its investor relations policies and procedures.
"Companies should have regard to existing guidance in the market about how to conduct briefings to ensure confidential, market-sensitive information is not selectively disclosed,” ASIC Commissioner, Cathie Armour said.
The Federal Court in Melbourne will ultimately decide the penalty Newcrest should pay, with the matter to be heard on June 27.
A class action by some of the company’s other shareholders is also underway.
Allen & Overy partner Mark van Brakel told the AFR that advisors needed to be sure they are complying with insider trading laws.
Analysts obviously need to be fully aware of what is publicly available information concerning a company, and ensure that they do not act upon information from a company that has not been publicly disclosed,” he said.