Business Plan 2020-21: FCA remains vigilant to potential misconduct
Legal 500, 2019
Insider dealing covers allegations of trading whilst in possession of inside information, encouraging others to deal in such circumstances and disclosure of inside information other than in the proper performance of one’s employment. The person who discloses the confidential information may do so to a friend, family member or colleague without any expectation that intention that person would trade on the basis of the information disclosed.
The Financial Conduct Authority (FCA), the main agency responsible for investigating these offences, is devoting increased resources to their detection and enforcement.
Suspected insider dealing may be dealt with a regulatory basis as a potential breach of Article 14 of the Market Abuse Regulation, which could result in a fine and / or ban from working in financial services. It can also be dealt with as a potential criminal offence under s.52 Criminal Justice Act 1993, which carries a maximum penalty of seven years' imprisonment and / or a fine.
The FCA is taking on increasingly complex investigations and prosecutions, such as Operation Tabernula, one of the UK’s largest ever insider trading investigations, and often cooperates with overseas authorities including the Department of Justice (DOJ) Commodity Future Trading Commission (CFTC) and Securities Exchange Commission (SEC), as in the recent Forex investigation.
Whatever the circumstances, we understand how stressful and serious it is to be under investigation for insider dealing offences and have a strong track record in achieving the best results for clients facing criminal and / or regulatory scrutiny.
Our wealth of experience in criminal, regulatory and employment issues arising in the context of insider dealing cases sets us apart from other advisers. We can also call upon reputation management colleagues if required.
We frequently advise in complex, multi-jurisdictional matters and work with established networks of forensic, markets and accounting experts as well as overseas lawyers.
Whatever the situation in question, we offer strategic and practical advice to achieve the best possible outcome for our clients.
For more information please contact our specialist FCA investigations team or take a look at our FAQs about insider dealing below.
Insider dealing is where a person who has inside information about certain securities (e.g. shares in a listed company) does one of the following whilst in possession of that information:
Inside information is information which:
Note: The definitions of inside information and insider dealing vary slightly between the criminal and civil offences.
Information is inside information if each of the criteria in the definition of inside information is met. It is not possible to prescribe all types of information. However, non-public information relating to a listed company which affects the following matters may well constitute inside information:
This might include, for example, a listed company’s financial results, takeover bids, or major contract wins or losses, before they are announced to the market.
Yes, a person can only be guilty of insider dealing if he has the inside information “as an insider”. This means that the person must both know that the information is inside information and also know that he has the information from an inside source.
A person has information from an inside source in three scenarios:
Mr White is the Head of Corporate at a listed company. During an important meeting at work, he is informed by the CEO that a rival company has tabled a takeover bid, at a significant premium to the current share price. After returning home that evening, Mr White purchases £100,000 of shares in the company, hoping that once the takeover bid is announced, the share price will rise and he will realise a profit upon selling his shares.
If Mr White also tells his friend, Mr Black, about the takeover announcement, this will constitute unlawful disclosure of inside information by Mr White, which is also a criminal offence. If Mr Black goes on to trade in the company’s shares, knowing that the information he received from Mr White was inside information, Mr Black will also have committed insider dealing.
There are a number of statutory 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.
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