Anyone who thinks Citigroup being sued in Australia for insider trading has no international implications should think again.

As commentator Malcolm Maiden points out, the lawsuit is firing a shot at the international architecture of the investment banking industry. One thing is clear: it challenges the way that industry works so the stakes are high.

''The case against Citi challenges one of the fundamental assumptions behind a thoroughly modern investment bank: that conflicts of interests raised by an investment bank being adviser, marketer, analyst and trader on a deal can be either managed or sterilised without the need to actually shut the activity down.
Brokers and investment banks were once pure agents, buying and selling shares on behalf of clients: it was thought that a firm would be hopelessly in conflict with its clients if it traded in its own right.
But that started to change in the '80s, along with other antiquated notions, including the compartmentalisation of the markets for equity and debt. The big players now all trade actively for themselves, in shares, bonds, you name it, through their proprietary trading divisions. They also network their advisory units with divisions that can place shares and debt for companies. In this vertically integrated structure there are potential conflicts everywhere, and the investment banks have constructed exceedingly delicate and intricate mechanisms to handle them.
Citi can make some obvious points. That because it was known to be Toll's broker, totally shutting down trading in Patrick shares would have broadcast to the market that a bid was imminent, for one thing. And that proprietary trading add bucket loads of liquidity to the market, reducing share price volatility.
But there's old-school dry logic behind ASIC's position, and ASIC is obviously attracted to it, because there was no attempt to negotiate with Citi ahead of the legal action.
The trouble is, it just isn't how the investment banking world works: Citi will contest this action vigorously, and it might have the northern hemisphere industry in its corner if it looks like losing."

Investment banks around the world will be watching this case closely.