A CONTROVERSIAL finding that cast doubt over the scope of the Australian Securities and Investments Commission’s power to regulate misleading stock exchange statements was overturned by the Federal Court last week.
As reported in the Sydney Morning Herald, the case concerned a claim by Citrofresh International in 2005 that a new disinfectant spray could stop the spread of the HIV virus. The company’s share price initially went through the roof, but fell back again.
However, despite Citrofresh later admitting to the Federal Court that the claim was false, ASIC was unsuccessful in its action against the company’s chief executive, Ravi Narain.
According to Justice Alan Goldberg, ASIC had not proved that Narain was involved in issuing the statement, or that the statement related to a “financial product” as required by the Corporations Act.
However, to the relief of investors everywhere, Goldberg’s finding was set aside last week by the Federal Court and the case is due to be reheard. According to the SMH, several law firms had anticipated the result and had advised clients not to rely too heavily on the initial judgement.