The Tasmanian Premier is refusing to comment on the severity of the sentence handed down to the former chairman of the failed Tasmanian timber company, Gunns, for insider trading.

70 year old John Gay has avoided jail for the offence, and has instead been fined $50,000 by Justice David Porter.

Gay was at the helm of the former timber giant in December 2009 when he sold 3.4 million of his shares.

One month earlier he had seen a private management report highlighting an expected drop in profits.

Gunns' share price plunged with the release of its half yearly results.

In sentencing, Justice Porter told the Supreme Court in Launceston the offending was not in the serious category of insider trading, saying he was satisfied Gay was of exemplary character.

He said Gay had been motivated to sell the shares by his prostate cancer diagnosis, not by the receipt of the price sensitive information, and he had told the company secretary of his intent to sell the shares.

Key points: John Gay avoids jail, is fined $50,000

John Gay avoids jail, is fined $50,000 Justice Porter says offending was not serious

Justice Porter says offending was not serious ASIC says conviction 'sends a message'

ASIC says conviction 'sends a message' Gay 'looks forward to focusing on health, family'

Justice Porter told the court Gay had avoided a loss by selling the shares when he did, but it was impossible to tell how much he had benefitted.

Gay did not comment to waiting media, but he was heckled by two Tamar Valley pulp mill protesters as he left the court.

Gay pleaded guilty to insider trading on the basis he should have known he had information that may have influenced shareholders if it was made public.

His lawyer said Gay was not motivated by Gunns' financial troubles, but by his wish to reduce debt when he had been diagnosed with cancer.

The Premier Lara Giddings would not comment on the severity of the sentence.

"Australia has strong business laws to prevent insider trading and I think there does need to be deterrence in these matters, these issues are serious," she said.

State Government Minister, Michelle O'Byrne, says the collapse of Gunns has had a major impact in Tasmania.

"Certainly Gunns were a very large employer in Tasmania, a lot of people have a huge working experience with Gunns, and of course they played a large public role as well," said Ms O'Byrne.

Sentence shock

Australian Shareholders' Association spokesman, Stephen Mayne, says he is shocked by the sentence.

"I mean clearly you'll get some sort of leniency because you plead guilty but I would have thought some form of non-custodial sentence or periodic detention or something just to send a message would have been more appropriate, so yes, surprised it's so light," he said.

"This is the first time in Australian history that a former ASX 100 chairman, you know, someone who was personally worth many, many tens of millions of dollars, a very high profile individual, when they admit to insider trading, I would have thought that it would be more serious than a $50,000 fine and I just think it's disappointing the soft message that goes out to the community."

The director of the Centre for Corporate Law at Melbourne University, Ian Ramsay, says the penalty seems very lenient.

"We're all invested, indirectly through superannuation and therefore we need to be reassured that people aren't trading on the basis of inside information and that when they do, they will be punished appropriately," he said.

"That's why today's judgment sends a very, very mixed message."

Vas Kolesnikoff, who runs the research firm, Kolesnikoff Governance, says in this case, the punishment does not fit the crime.

"You just can't have directors and executives placing themselves ahead of the people whose money they are managing," he said.

"Our super, our savings are in these companies and as you can see in this Gunns case, Mr Gay got out but the shareholders that were stuck in it at the time, the superannuation didn't get out."

Gay responds

Gay has issued a statement saying he is looking forward to spending more time with his family and focusing on his health.

He says the past four years had been among the hardest of his life.

"I'm looking forward to enjoying time with my wife, children and grandchildren, working on my farm and focusing on my health," he said.

"I hope all people respect my privacy as I work though treatment for my ongoing battle with cancer."

Crime penalty

ASIC Commissioner Cathie Armour would not comment on the size of the sentence, but says Gay's conviction sends a message to other Australian company directors.

"The decision of the court on an appropriate penalty is one that the court makes in regard to the relevant facts at the time, and we respect that that's how things happen, and we will have a look at the comment of the court around penalty," she said.

Ms Amour says Gay is the most senior executive to be convicted of insider trading in Australia, and his conviction sends a message to company directors.

"The conviction of Mr Gay sends a message to directors to carefully consider the information they possess when making a trading decision,’ she said.

"Company policies on trading windows are not a protection for trading when a director possesses inside information."



At the time of Gay's offending, the crime had a maximum penalty of 5 years and/or a fine of $220,000.

The penalties have since been changed to 10 years jail and/or a fine of $765,000, or three times the total benefit gained, whichever is greater.

Since 2009, ASIC has prosecuted 28 insider trader cases.

19 were successful and four are awaiting trial.