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Insider Trading Solicitors

If you are being accused of insider trading, it is vital to seek legal advice as quickly as possible. Insider trading is a serious business crime and a charge of this nature can have severe repercussions on both your personal and professional life.

Penalties for those found guilty can include lengthy prison sentences and fines. Specialist insider trading solicitors have the knowledge, expertise and experience in order to build a robust defence for your case and secure the best possible outcome.

What is insider trading?

Insider trading, also known as insider dealing, occurs when a person deals in securities on the basis of inside information they have acquired.

Inside information is information which is not yet public knowledge and, if it were to be made public knowledge, it would affect the price of the securities.

What is the law on insider trading?

Insider trading is a criminal offence under the Criminal Justice Act 1993 (Section 52).

A person is guilty of insider trading if:

  • they deal in securities that are price-affected securities in relation to the (inside) information they have
  • they encourage another person to deal in securities that are (whether or not that other knows it) price-affected securities in relation to the information
  • they reveal the information, otherwise than in the proper performance of the functions of their employment, office or profession, to another person
  • the dealing of the securities happens on a regulated market or
  • their dealing relies on a professional intermediary or they are themselves acting as a professional intermediary

What is an “insider”?

  • A person only has information as an insider, with regards to insider trading, if:
  • the information is – and they are aware it is – inside information and
  • they have the information – and they are aware they have the information – from an inside source
  • An individual has information from an inside source if they have it through:
  • being a director, an employee or a shareholder of an issuer of securities or
  • having access to the information by virtue of their employment, office or profession.

Alternatively, the indirect or direct source of the information is a person mentioned above (a director, for example).

This means that if, for example, a person receives a “tip off” from a friend who has insider information about a particular deal, and that person is aware that the tip they are being given is inside information, they could become an insider as defined by the law.

What is the sentence for insider trading?

The maximum sentence for a summary conviction (a conviction in the Magistrates’ Court) for insider trading is a fine or prison sentence not exceeding 6 months (or both).

The maximum sentence for a conviction on indictment (a conviction in the Crown Court) is a fine or a prison sentence not exceeding 7 years (or both).

The court can also disqualify anyone convicted of insider trading from acting as a company director.

What are the defences for insider trading?

Section 53 of the Criminal Justice Act 1993 sets out the defences to the offence of insider trading.

Section 53 (1) deals with when a person is not guilty of insider trading by virtue of dealing in securities. This is the case if they show:

  • they did not, at the time, expect the dealing to result in a profit or
  • they believed, at the time, on reasonable grounds that the information had been disclosed widely enough to ensure that none of those taking part in the dealing would be prejudiced by not having the information
  • that they would have done what they did even if they had not had the information

Section 53 (2) details the defences to insider trading when a person encourages another person to deal in securities. These defences again include that the individual did not expect the dealing to result in a profit and that they would have done what they did even if they had not had the information.

Schedule 1 of the Criminal Justice Act also sets out four ‘special defences’ which are designed to ensure that the offences of insider trading (as detailed in Section 52 of the Act) do not affect legitimate practices.

For example, an individual is not guilty of insider trading for dealing in securities or encouraging another person to deal, if they show that the information they had as an insider was market information and it was reasonable for an individual in their position to have acted as they did, despite having that information as an insider at the time.

Market information could be, for example, information that securities of a particular kind have been (or will be) acquired or disposed of.

What are FCA investigations for insider trading?

The Financial Conduct Authority (FCA) can investigate allegations of insider trading. The Financial Services & Markets Act 2000 (FSMA) details the FCA’s powers.

Section 188 of the FSMA sets out seven types of “market abuse” behaviour. These include insider dealing, improper disclosure, misuse of information and manipulating devices.

Market abuse can be a civil or criminal matter. Experienced insider trading solicitors have the knowledge and expertise necessary to take proactive steps in order to attempt to secure civil/regulatory action from the FCA, rather than criminal, if appropriate.

Why do I need specialist insider trading solicitors?

If you are being investigated for insider trading or are facing prosecution, obtaining advice from an expert in insider trading is essential.

Insider trading is a highly complex area of law and being convicted of insider trading can have devastating consequences on your life and your reputation. Having a solicitor experienced in insider trading law on your side from the start, can make a real difference to the outcome of your case.

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