Insider Dealing
The criminal offence of insider dealing is set out in Part 5 of the Criminal Justice Act 1993 (‘CJA 1993’). Under s.52 of CJA 1993 an offence is committed if an insider (1) deals in price affected securities when in possession of inside information, (2) encourages another to do so and (3) discloses inside information otherwise than in the proper performance of his employment, office or profession.
The Financial Conduct Authority (‘FCA’) has the power to prosecute the criminal offence of insider dealing; however, does not have powers of arrest and, accordingly, works alongside the Police to exercise its prosecutorial function.
The civil offence of insider dealing is set out in the UK Market Abuse Regulation (‘UK MAR’). For UK MAR, market abuse comprises unlawful behaviour in the financial markets and includes insider dealing (Article 14), unlawful disclosure of inside information (Article 14) and market manipulation (Article 15).
UK MAR is overseen by the FCA which has investigatory and enforcement powers against individuals and organisations.
Defences
CJA 1993 contains several general defences to the criminal offence of insider dealing, including the ‘no advantage’ and the ‘equality of information’ defences. There are also additional special defences, one of which relates explicitly to ‘market makers’. The burden of proof in respect of any of the general of special defences rests squarely on Defendants.
The provisions of CJA 1993 and UK MAR, although closely aligned are not identical. Some of the general and special defences available in a criminal prosecution under CJA 1993 will not avail a respondent in regulatory proceedings under UK MAR.
Punishment
The maximum punishment for a person who is guilty of criminal insider dealing under CJA 1993 is a term of imprisonment of 10 years or unlimited fine, or both.
The punishment for an individual found to have committed insider dealing under UK MAR can include orders to cease and desist, public warnings, disgorgement of profit, withdrawal or suspension of authorisation, bans and significant financial sanctions. Notably, any financial sanction will be tailored to the seriousness of the insider dealing; however, will also be adjusted to carry sufficient deterrent force and may attract a discount for successful settlement endeavours.
Suspicious transaction reporting
UK MAR retains the requirement for firms and venues in the UK to provide suspicious transaction reports to the FCA.
Territorial Scope
The territorial scope of s.52 of CJA 1993 is limited by s.62 CJA 1993 and requires a close nexus with the UK. The extent of the territorial nexus required for the primary offences of dealing differs to that required for the offences of encouraging or disclosing.
Serious Organised Crime and Policing Act 2005 (‘SOCPA’)
Sections 71 and 72 of SOCPA, as amended, confer on specified prosecutors, including the FCA, Prudential Regulation Authority and Bank of England, powers to grant immunity from prosecution and to give undertakings regarding the use of evidence in criminal proceedings or proceedings under Part 5 of PoCA 2002.
Defending an allegation of Insider Dealing
The key to defending allegations of insider dealing is early and proactive expert intervention, informed by a thorough understanding of the parallel criminal and civil regimes applicable to insider dealing in the UK.
How can we help?
We can deploy a multi-disciplinary team of expert criminal, civil and regulatory lawyers and compliance experts to design and implement compliance programmes, conduct internal and external investigations, advise on suspicious activity reporting, provide guidance in relation to the SOCPA powers available to investigators and devise and execute bespoke litigation strategies including engaging the FCA in early settlement discussions to maximise any potential discounts.
We benefit from a wealth of in-house expertise in several disciplines including criminal defence, commercial disputes, compliance and regulatory. We also enjoy enduring relationships with leading consultants including compliance experts, investigators, specialist barristers, forensic accountants and industry experts.
Free Initial Discussion
If you have been notified of an allegation of insider dealing or market abuse or an impending investigation or prosecution into such allegations it is critical that you contact us as soon as possible.
Contact our lawyers by calling us on 0203 987 0222 or complete our enquiry form and one of our team will call you back.
