Scarmans

Insider Dealing & Market Abuse

Insider dealing has been a criminal offence since 1985 and is currently set out in Part V of the Criminal Justice Act 1993.

An individual and company will commit the criminal offence of insider dealing if they have inside information and:

  • that information is price-sensitive in relation to shares;
  • they deal in those shares, or encourage someone else to deal in those shares or pass inside information to another person;
  • the dealing takes place on a regulated market or through a professional intermediary such as a broker. (Included in the definition of a regulated market are exchanges elsewhere in the EU and some other overseas markets.)

If successfully prosecuted, insider dealing can result in a fine and/or up to seven years’ imprisonment.

The insider will not commit the offence if they pass on general information about the market a company operates in.

There are several other defences available to someone charged with insider dealing: (1) they did not expect the dealing to result in a profit by virtue of the price-sensitive information; they reasonably believed that the information had been disclosed widely enough to avoid prejudicing other parties to the share transaction (2) the person who bought or sold the shares would have done so without the information – because they needed to sell the shares to raise the cash, or to come within a permitted dealing period, etc.

Certain types of behaviour, such as insider dealing and market manipulation, can amount to market abuse. Types of conduct constituting market abuse are set out in section 118 of the Financial Services and Markets Act 2000 and in the Market Abuse Directive. Seven types of behaviour characterise market abuse:
  • Insider dealing;
  • Improper disclosure of inside information;
  • Misuse of information;
  • Manipulating transactions;
  • Manipulating devices;
  • Disseminating information likely to give a false or misleading impression;
  • Market distortion.

The FSA can impose unlimited fines on companies and individuals found to have committed market abuse. Other sanctions include: a public statement that a person has engaged in market abuse; a court injunction to prevent any repeat; a requirement to give up any profits made or to pay compensation to the victims of any abuse.

Our specialist team of Insider Dealing and Market Abuse lawyers have vast experience helping individuals and companies in this complex area of law.

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