10c Insider Dealing Flashcards
What is insider dealing?
When an individual trades in shares on which they have inside information.
This is a criminal offence under the criminal justice act.
How would you bring an action against insider dealing?
Must prove:
- The individual is an insider.
- Must have insider information.
- Committed one of the 3 offences under the criminal justice act.
What is a primary insider?
Employee or officer of the company
What is a secondary insider?
Someone who gains information from a primary insider.
What is inside information?
Information relating to particular shares of a company that is not yet public but if it was, it would have a significant effect on the share price.
What are the 3 offences under the criminal justice act?
- Dealing
- Encouraging others
- Improper disclosure
What is dealing?
Buying or selling shares with inside information.
What is encouraging others?
Encouraging other people to act on shares that you hold inside information for.
What is improper disclosure?
When you pass on inside information to someone else.
What is the exception to improper disclosure?
If it is in proper performance of their job.
If the CPS makes a successful case against the defendant for insider dealing, what defences can the defendant use?
- Didn’t expect to make a profit (defendant didn’t expect their actions to lead to a profit).
- Thought the information was already public.
- They would have acted the same with or without the insider information.
- Believed the other party wouldn’t act on the information.
What is the criminal penalty for insider dealing?
7 years imprisonment and/or unlimited fine.
What are the consequences of insider dealing (apart from prison and fine)?
- Transaction is still valid and enforceable.
- If the individual is the director of the company, the company can sue for breach of duty and become liable to the profit made.
