Insider trading (also known as insider dealing) can be easily defined as using information about a company that is not available to the public to buy or sell stocks or shares in order to make a profit or avoid a loss. For example, it happens when an employee is party to information about the sale of a FTSE-listed company and uses that information to buy stocks shortly before anyone can predict a rise in value. This is clearly unethical and therefore illegal.
However, when it comes to insider trading, theory and practice are two very different things. When high profile cases of this type of white collar crime hit the headlines, it becomes clear just how complex and difficult to prove cases of this kind can be.
Crime or coincidence?
The financial markets are fuelled by gossip and rumour so when allegations of insider trading arise, they can be notoriously difficult to prove in order to impose a punishment. The UK regulator, the Financial Conduct Authority (FCA), has ambitious targets when it comes to successfully prosecuting professionals who abuse the sensitive financial information they are party to. However, as The Times newspaper recently reported, in the five years to 2018, they and their previous incarnation (the Financial Services Authority) secured 12 convictions in just eight cases of insider trading. Compare that to the fact that the Department for Work and Pensions achieved over 10,000 convictions for benefit fraud in one year alone and it’s easy to see why the FCA has come in for criticism for failings in securing insider trading sentences.
A recent case in point was the 2016 trial of five men who had been accused of an insider trading conspiracy that netted £7.4m. Two of the accused were convicted and three were acquitted during a 12-week trial that came about as a result of a 9-year investigation that cost £14m. This case demonstrates both the complexities and grey areas in cases like this – but also the authorities’ determination to impose punishments for insider trading in the face of lengthy investigations and enormous cost.
Insider trading penalties
Being found guilty of insider trading can have devastating consequences with substantial fines, prison sentences and confiscation of assets proceedings designed to return illegally obtained money to its rightful owners a possibility. The maximum sentence for insider trading is 7 years although the longest sentence given to date is 4.5 years.
When is insider trading allowed?
When an employee buys shares in the company they work for, that can be defined as insider trading. Clearly, this is something that happens every day as senior executives invest in their organisations within the parameters of the law and more junior employees take advantage of perks in the form of share save schemes.
Insider trading only becomes problematic when an employee uses secret information in order to buy shares that will shortly increase in value or sell off shares that will plummet when news such as poor results is made public.
As many professionals are shareholders in companies they work for and have dealings with, accusations of insider trading, which may be wholly unfounded, are not restricted to the high profile and high-value cases of city traders which make the headlines.
Defending insider trading cases
The FCA actively pursues insider trading cases under the terms of the Financial Services and Markets Act 2000. Due to this, even if you are aware of mere rumours about your financial affairs in terms of insider trading, it’s crucial to speak to a specialist business crime solicitor at the earliest opportunity. Asking for legal advice is not an admission of guilt and so if you are worried about an investigation or even just gossip at work regarding insider trading, the business crime solicitors at Purcell Parker may be able to establish the fact that you have done nothing wrong, enabling you to get on with your life with your professional reputation intact and no threat of an official investigation.
In situations where an investigation is unavoidable, our white-collar solicitors will be on your side through every part of the process, including interview under compulsion and any trial and/or confiscation of assets procedures.
Business crime solicitors you can trust
If you have been implicated in allegations of insider trading, our discreet and highly experienced white collar crime solicitors can help you defend your reputation. To find out more fill in our contact form or call 0121 236 9781.