Why defamation laws worry short sellers more than ASIC

The payment company’s fraudulent model was eventually exposed after a five-year investigation by the Financial Times. Viceroy’s co-founder, Fraser Perring, was among the earliest known critics of the company.
The investigation into Mr Bernarde ceased two weeks after he was summoned to a compulsory interview in November 2021. But he said ASIC’s approach had created a professional hazard to anyone who works in financial services and “voices a somewhat controversial opinion”.
An ASIC spokesman insisted the probe into Mr Bernarde was not part of a broader crackdown on activist short selling and that the regulator had no intention of curtailing negative research.
“ASIC recognises the role short-selling can play, provided appropriate practices are followed,” a spokesman said. “ASIC has published clear guidance on the matter, which warns against false and misleading statements and other potentially manipulative conduct, and offers key recommendations to avoid unfair outcomes.”
However, at least one other Australian short seller was subject to a similar mandatory interview. The Financial Review reported in January 2022 that Bronte Capital’s John Hempton was interviewed under oath by ASIC after he publicly expressed concerns about insurer IAG’s exposure to collapsed lender Greensill Capital. That caused a slide in IAG shares.
Mr Hempton confirmed he was summoned for an interview but declined to comment further. He has previously voiced his concerns about Australia’s defamation laws which have “allowed the crooks free rein”.
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“You simply can’t criticise them publicly, or you will face a defamation suit. We have seen several places where crooks have been shielded by Australia’s defamation rules,” Mr Hempton told his investors last year.
Mr Murray has previously run for federal parliament as the Labor candidate for the seat of Wentworth. He has since left J Capital and is the chief operating officer of ASX-listed lithium explorer Anson Resources.
He said J Capital – which penned several controversial reports including an October 2019 report on ASX-listed logistics software giant WiseTech Global – had “never got any calls from ASIC” about its activist short activities.
But Mr Murray said the regulator did engage with J Capital over its reports when it was a subscription-based research firm.
“They tended to last for an hour – 10 minutes would relate to the information and how we sourced it and the remaining 50 would relate to the content of the report as the entity we had written about,” he said.
J Capital was regulated in Hong Kong, and had an approved exemption from regulation in Australia. When it became an activist short seller it was regulated by the Securities Exchange Commission in the United States, and on legal advice, it chose to forgo regulation but to comply with all laws.
“Activist short selling is dramatic, but ultimately, it’s a business, and you have to operate it as a business, and operate it legally,” Mr Murray said.

This data comes from MediaIntel.Asia's Media Intelligence and Media Monitoring Platform.