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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.
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.
Insider trading is a criminal offence under the Criminal Justice Act 1993 (Section 52).
A person is guilty of insider trading if:
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.
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.
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:
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.
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.
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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