It is understood that the Australian Securities and Investments Commission is bringing the charges against Mr Gay, 68, who stood down as the former timber company's chief in May last year.

ASIC said yesterday it would not comment until there was a court hearing.

An ABC report said that the charges related to Mr Gay selling more than 3.4 million Gunns shares in early December 2009.

The value of the shares dropped dramatically when the company's half-year report was made public the following February.

Mr Gay did not return The Examiner's calls and Gunns declined to comment last night.

Sources said that the period at issue was a time when Mr Gay was ill and was advised to rationalise his interests.

He is believed to have realised more than $3 million from the sale of his Gunns' shares before they crashed more than 20¢ to 70¢ after the February 2010 half- yearly result.

Yesterday Gunns shares were selling at 19.5¢.

Current managing director Greg L'Estrange took over the top Gunns job from Mr Gay after he resigned last year.

Mr Gay recently bought the Somerset veneer mill and Deloraine sawmill from Gunns.

Mr Gay has also become part owner of a kiln-dried operation in Launceston.

The news yesterday came with Gunns due to hold its annual meeting in Melbourne tomorrow - the first to be held outside Tasmania.