David Jones has engaged heavyweight law firm Herbert Smith Freehills to handle its dealings with the corporate regulator, which has confirmed it is examining share acquisitions by two directors of the retailer's shares just before the release of its quarterly sales.
One of the law firm's senior partners, Philippa Stone, is a director of David Jones but she is not one of the two directors whose share buying is the focus of the Australian Securities and Investments Commission's attention.
ASIC is taking its microscope to the share purchases by Steve Vamos and Leigh Clapham, who were both sanctioned by David Jones chairman Peter Mason.
Mason has stated publicly he does not think the quarterly sales data was price-sensitive.
However, this view has been questioned by several shareholders and will be examined by the regulator.
While the transactions were undertaken within the trading window allowed by David Jones' internal rules, these are trumped by companies law that does not allow trading by parties with knowledge of price-sensitive information.
So it comes down to a judgment around whether the quarterly sales numbers are price-sensitive.
Mason, Vamos and Clapham need look no further than the company's own announcement to the ASX. All David Jones' quarterly sales announcements have a price-sensitive symbol attached to them.
The share price rose more than 6 per cent when the sales numbers were released because they were better than the market had expected.
Vamos and Clapham followed corporate procedure to the letter and sounded out the chairman. It was only after the issue caused a stir in the media that Mason approached the regulator.
It is not clear whether Stone - a heavy hitter inside the law firm - assisted the chairman in dealing with ASIC. She is on the Law Council of Australia's corporations law committee and ASIC's equity offerings liaison committee. She is also a member of the Australian Securities Exchange listing appeals tribunal.
Mason said: "Andrew Eastwood of Herbert Smith Freehills is assisting the company."
The other recent David Jones ASX statement that had a price-sensitive tag alongside it was chief executive Paul Zahra's intention to announce his resignation.
While these two issues might seen unrelated, they intersect in some respects. The departure of Zahra has prompted closer examination of the company and its corporate governance practices, including disclosure.
When Zahra's decision to exit was initially announced, the market was told it was an amicable decision and he was just tired. But over subsequent weeks, information has dribbled out that the chairman and two directors under the spotlight were at loggerheads with Zahra.
It seems the directors wanted to show support for the company in the wake of Zahra's departure announcement and bought stock, which also happened to be a couple of days after the quarter books were ruled off but before the release was made public.
ASIC is understood to have already begun interviewing some David Jones directors and examining emails between the directors and the chairman.
At best, the three men are potentially guilty of an error of judgment and a lack of an understanding of the industry and what factors can move a retailer's share price. It is understood all David Jones directors receive weekly updates on sales.
Zahra's relationship with Mason and a couple of other directors appears to have been the main cause of his decision to announce his resignation. The major shareholders want Zahra to stay and have voiced their support publicly for his strategy, which has started to get traction and is reflected in the full-year results and sales for the first quarter.
It is understood the root of the tension between Zahra and the three board members is around what has been described as interference in management matters.
The issue apparently came to a head at a board meeting on October 21 at which Zahra registered his protest.