FCA publishes first Decision Notice under the partly contested cases process
With a proven track record in litigation and regulation, and a wealth of experience representing those accused of insider dealing, we are uniquely placed to advise in relation to such investigations and prosecutions.
We are experienced in representing individuals who have become embroiled in insider dealing investigations, whether they come from the world of finance, business or have become caught up in an investigation through personal trading, spread betting or other non-commercial trading activity.
Insider dealing covers allegations of dealing whilst in possession of inside information, encouraging others to deal in such circumstances and disclosure of information other than in the proper performance of one’s employment. The Financial Conduct Authority (FCA) is the main agency responsible for taking criminal or regulatory enforcement action against those accused of these offences.
Insider dealing is where a person who has inside information about securities (e.g. shares) does one of the following whilst in possession of the inside information:
Insider dealing can be prosecuted under s52 of the Criminal Justice Act 1993, the maximum penalty is 7 years imprisonment and/or a fine. It can also be dealt with as a regulatory matter under Article 14 of the Market Abuse Regulation for which the penalties include a fine and/or a ban from working in financial services. Find out the differences between criminal and regulatory proceedings.
The definitions of inside information and insider dealing (see below) vary slightly between the criminal and regulatory offences.
Inside information is information about particular shares or a particular company who issued those shares, which is of a specific nature; is not in the public domain; and if it were in the public domain, would be likely to have a significant effect on the price of the financial instruments (e.g. the share price rises or falls).
A person can be an insider through being a director, employee or shareholder of an issuer of securities (listed company) or through having access to the information because of his employment, office or profession, or if he is provided the information directly or indirectly by such a person.
A person can only be an insider if he both knows that the information is inside information and knows that he has the information from an inside source.
Company A wants to take over Company B. Mr White is one of the company directors of Company A and he knows that they are going make the takeover bid on a particular date and that when news of the takeover is announced, the price of the shares in Company A is going to rise. The knowledge that Mr White has is inside information. If Mr White discloses this information to another person outside that allowed by the terms of his directorship, he would be guilty of disclosing inside information.
If Mr White, with the knowledge of the takeover, purchases shares in Company A, or Company B, he is guilty of insider dealing.
Mr White also tells his friend, Mr Black, that he knows that the takeover is going to be announced on a particular date and that this will be positive news for Company A. Mr Black buys 100 shares for £1 each before the announcement is made. When the announcement is made the shares of Company A rise to £2 each and Mr Black sells his shares, making a profit of £100. Mr Black is also guilty of insider dealing and Mr White is guilty of disclosing inside information and of encouraging Mr Black to deal.
There are some defences to the offence of insider dealing, including:
These defences are technical and complex in their nature and it is highly recommended that anyone considering such a defence obtains specialist legal advice.
The FCA is stepping up the fight against insider dealing with increased resources for detection and enforcement. They are taking on increasingly complex investigations and prosecutions, often in co-operation with overseas authorities. They use the full range of their criminal powers including conducting dawn raids, interviewing suspects in detention at police stations, restraining accounts worldwide and extraditing suspects.
Insider dealing criminal and regulatory proceedings can be brought against anyone – you do not have to work in the financial sector or even need to be a professional trader. The person who discloses the confidential information may do so to a friend, colleague or loved one without any intention for trading to occur. Increasingly insider dealing investigations focus on spread betting.
We understand insider dealing accusations and investigations, in particular the dynamic between criminal and civil investigations and the particular difficulties of those who work in the regulated sectors (whether financial or something else). Sometimes cases involve complex financial transactions, where we work in conjunction with others where necessary, including experts, accountants and foreign lawyers.
The first an individual may know of an insider dealing allegation is when they are arrested and interviewed in a police station, subject to search warrants or have their funds frozen by a restraint order. Our lawyers provide strategic and pragmatic advice in financial regulatory and criminal investigations, in circumstances where there is often a complex dynamic between dealing with the FCA and/or overseas authorities and professional regulatory or employment issues.
Our unique combination of expertise in criminal, regulatory and employment investigations enables us to give clear and pragmatic advice in often stressful circumstances.
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