A questioning mind: standards for negligence and recklessness in Greencool

The Market Misconduct Tribunal (MMT) recently disagreed with the Securities and Futures Commission, holding that an executive director and a number of non-executive directors did not commit the market misconduct of dissemination of false or misleading information.

Introduction

The MMT recently issued a report on the alleged regulatory culpability for market misconduct of executive directors, independent non-executive directors and the group financial controller, following accounting frauds that took place within the Greencool group of companies between 2000-2004.

The report came to different conclusions for each officer, with culpability for negligence or recklessness not necessarily dependent upon actual knowledge of the fraud in each case.

In this case, the group financial controller, despite not having actual knowledge of the fraud, was held to a higher standard than a director, on account of his role and responsibility for ensuring the financial integrity of the accounts.

This report is a useful reminder that executive and non-executive directors are held to the same standard in respect of the management of a company. Accordingly, even as a non-executive director who does not manage the day to day affairs of a company, it is important to always have a questioning mind.

To read the full briefing, please click here.


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