NaN:aN Former Gunns chief John Gay arrives at Launceston Supreme Court to be sentenced for insider trading. Picture: Ross Marsden

SHAREHOLDERS have slammed as too lenient the $50,000 fine handed to former Gunns chairman John Gay for insider trading.

The sentence was handed down today in Tasmania's Supreme Court, with Justice David Porter declaring Mr Gay's offence in the “less serious category” and the former timber company chairman to be of “exemplary character”,

Gay, 70, had pleaded guilty to selling $3.1 million worth of Gunns shares in December 2009 while in possession of a management report showing a forecast 139 per cent fall in profit.

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He had faced a maximum penalty of five years jail or a fine of $220,000.

The Australian Securities and Investments Commission (ASIC) said the outcome sent a message to company directors.

But Australian Shareholders' Association chairman Ian Curry said shareholders were entitled to be disappointed.

“We're surprised at the leniency of the judge's decisions,” Mr Curry said.

“Where a director has pleaded guilty to a charge of insider trading we would have thought that there would have been the potential for a jail term or a suspended jail term.”

Gay, forced out of the once-mighty timber company by shareholders in May 2010, admitted that he ought to have known the information was not generally available and was material to the share price.

Justice Porter said Gay had decided to sell the shares because he had been diagnosed with prostate cancer and had a desire to get his affairs in order in the event of his death.

The anxiety caused by the disease affected Gay's decision making, the judge said.

He said Gay had been advised by company secretary Wayne Chapman that he was in a permitted trading window and the chairman had been reassured by this.

But Justice Porter told Gay, who changed his plead to guilty earlier this month: “You ought to have exercised far greater care.”

He said while insider trading was a serious offence that undermined confidence in the market, there were factors that “differentiated” the Gay case from others.

These included that Gay had already decided to sell the shares before coming into possession of the insider information.

As well, the judge told Gay he was satisfied he had sold the shares because of “the state of your health and concerns about how long you had to live”.

“I cannot be satisfied that no sentence other than imprisonment is appropriate,” Justice Porter said.

The court heard that jail time could have a serious impact on his health.

Justice Porter described Gay as a person of “exemplary character ... with a reputation of honesty and integrity.”

Mr Curry said Mr Gay's health did not explain the leniency of the sentence.

“Whilst one doesn't deny that he did have health problems, we don't believe that excuses him,” he said.

“It's three-and-a-half years now since that decision and Mr Gay's health still seems to be under control.

“We think the judge accepted that claim lightly.”

ASIC commissioner Cathie Armour said Gay was the most senior Australian executive to have been convicted of insider trading.

“The conviction of Mr Gay sends a message to directors to carefully consider the information they possess when making a trading decision,” Ms Armour said in a statement.

But Mr Curry rejected that.

“I think there was a clear opportunity for the judge to send a message to the business community in a position where a chairman ... took this action and clearly profited at the expense of shareholders generally,” he said.

“ ... This case certainly doesn't send a strong message."

Outside court, Gay was confronted by locals outraged that he had been allowed to walk free from court, despite his conviction carrying a potential sentence of five years imprisonment.

“You broke the law - you should have gone to jail,” yelled Garry Stannus, a local resident and opponent of Gunns' Tamar Valley pulp mill.

Another pulp mill opponent, Ross Story, wore a sandwich board reading “the end is nigh”. He said he was protesting Gay's pursuit of the controversial project. “I am disappointed he won't be doing jail time,” Mr Story said.

Gay, who now runs a small sawmilling business employing 22 people, refused to comment as he left court.

Gunns went into administration last year, and then receivership, amid an extended share trading freeze following the failure to secure financial partners for its $2 billion pulp mill project.

Additional reporting: AAP