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INSIDER TRADING SOLICITORS

 

THE LAW

 

Insider Trading is an offence under the Criminal Justice Act 1993. Insider trading is where someone buys or sells securities and is in possession of confidential information which the other person does not have and which affects the value of the securities. The confidential information will generally be in his possession because of his connection with the company. This can be where someone is director, employee or professional adviser or where someone in one of those positions has provided him with information. It also includes anyone who receives information which he knows to be price sensitive and which he realises has come directly or indirectly from an insider.

 

It includes trading on the London Stock Exchange or NASDAQ in America and also spreadbetting.

 

Section 52 of Criminal Justice Act 1993 creates 3 ways of committing the offence of insider trading – 

– Dealing in the security

– Encouraging another to do so and

– Disclosing inside information to another.

 

Inside information is defined in Section 56 of Criminal Justice Act 1993 – 

 

(1) For the purposes of this section and section 57, “inside information” means information which—

 

(a) relates to particular securities or to a particular issuer of securities or to particular issuers of securities and not to securities generally or to issuers of securities generally;

 

(b) is specific or precise;

 

(c) has not been made public; and

 

(d) if it were made public would be likely to have a significant effect on the price of any securities.

 

(2) For the purposes of this Part, securities are “price-affected securities” in relation to inside information, and inside information is “price-sensitive information” in relation to securities, if and only if the information would, if made public, be likely to have a significant effect on the price of the securities.

 

(3) For the purposes of this section “price” includes value.

 

 

It does not include rumours and must be important enough to affect the the price of the security if it was made public. This will often be down to an experts evidence but it will include takeovers and significant technological advances within a company. It can include negative information too such as a profits warning or loss of key personnel.

 

An insider is defined in Section 57 as – 

 

(1) For the purposes of this Part, a person has information as an insider if and only if—

 

(a) it is, and he knows that it is, inside information, and

 

(b) he has it, and knows that he has it, from an inside source.

 

(2) For the purposes of subsection (1), a person has information from an inside source if and only if—

 

(a) he has it through—

 

(i) being a director, employee or shareholder of an issuer of securities; or

 

(ii) having access to the information by virtue of his employment, office or profession; or

 

(b) the direct or indirect source of his information is a person within paragraph (a).

 

 

To be guilty of this offence you don’t have to be in a position of confidentiality it is enough if you came into possession of the insider information from a person who has the confidential information and you know that it comes from someone who holds that position as set out above. The Prosecution do not have to prove dishonesty.

 

You don’t have to profit to be guilty of this offence, you may give or receive inside information which later changes meaning the share price does not change in the way you expect. For example receiving information about a takeover that falls through.

 

DEFENCES.

 

There are a number of defences set out in Section 53 of Criminal Justice Act 1993 –

 

 

(1) An individual is not guilty of insider dealing by virtue of dealing in securities if he shows—

 

(a )that he did not at the time expect the dealing to result in a profit attributable to the fact that the information in question was price-sensitive information in relation to the securities, or

 

(b) that at the time he believed 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, or

 

(c) that he would have done what he did even if he had not had the information.

 

(2) An individual is not guilty of insider dealing by virtue of encouraging another person to deal in securities if he shows—

 

(a) that he did not at the time expect the dealing to result in a profit attributable to the fact that the information in question was price-sensitive information in relation to the securities, or

 

(b) that at the time he believed on reasonable grounds that the information had been or would be disclosed widely enough to ensure that none of those taking part in the dealing would be prejudiced by not having the information, or

 

(c) that he would have done what he did even if he had not had the information.

 

(3) An individual is not guilty of insider dealing by virtue of a disclosure of information if he shows—

 

(a) that he did not at the time expect any person, because of the disclosure, to deal in securities in the circumstances mentioned in subsection (3) of section 52; or

 

(b) that, although he had such an expectation at the time, he did not expect the dealing to result in a profit attributable to the fact that the information was price-sensitive information in relation to the securities.

 

(4) Schedule 1 (special defences) shall have effect.

 

(5) The Treasury may by order amend Schedule 1.

 

(6) In this section references to a profit include references to the avoidance of a loss.

 

 

Schedule 1 referred to above states – 

Special Defences

 

(1) An individual is not guilty of insider dealing by virtue of dealing in securities or encouraging another person to deal if he shows that he acted in good faith in the course of—

 

(a) his business as a market maker, or

 

(b) his employment in the business of a market maker.

 

(2) A market maker is a person who—

 

(a) holds himself out at all normal times in compliance with the rules of a regulated market or an approved organisation as willing to acquire or dispose of securities; and

 

(b) is recognised as doing so under those rules.

 

(3) In this paragraph “approved organisation” means an international securities self-regulating organisation approved by the Treasury under any relevant order under section 22 of the Financial Services and Markets Act 2000].

 

SENTENCE

 

The maximum penalty for this offence is 7 years imprisonment. 

 

The court will take into account various factors including the nature of your employment, the circumstances you came into possession of the confidential information, whether the behaviour was reckless or deliberate, the level of planning and sophistication involved. They will also look to see whether you acted alone or with others and the amount of anticipated or intended financial benefit.

 

HOW WE CAN HELP

 

It is important that you get expert representation in these sort of cases. It is not something that you should risk with a High Street firm. We have access to expert barristers and financial experts. There are a number of factors to take into account; Was the information widely known, would the information be likely to affect the share price, did you realise it was sensitive information? Was the information precise or specific?

We understand that this is a very worrying time for you. We will support you through this difficult time and provide you with the best possible defence.

 

We are happy to provide you with an initial assessment of the strength of your case.

 

Call us on 01623 600645 for free initial advice