First day in court for the Australian regulator's lawsuit against Citigroup alleging conflicts of interest and insider trading.

The case has attracted investment banks around the world worried. Regulators are watching it too. I explain why here.

In its lawsuit, the Australian Securities and Investments Commission (ASIC) is challenging the effectiveness of the so-called "Chinese wall" between Citigroup's proprietary trading desk, on the public side, and its corporate advisory services on the other. ASIC's allegations centre on substantial trades by Citigroup in Patrick shares in August 2005, on the last business day before the announcement of Australian transport giant Toll Holdings' takeover bid for its competitor Patrick.

In Federal Court in Sydney today, ASIC's lawyer Bret Walker QC cited a Citigroup internal document pitching for Toll's business in relation to Patrick as evidence of a conflict of interest. But Citigroup's lawyer Allan Myers QC said ASIC's case rested on it proving that Citigroup had a fiduciary duty to Toll. If it couldn't prove fiduciary duty, there was no case, he said. "The case being advanced by ASIC is utterly hopeless,'' Mr Myers said.

You can read Citi's opening statement here.

The case is expected to run for three weeks.