10c Insider Dealing Flashcards

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1
Q

What is insider dealing?

A

When an individual trades in shares on which they have inside information.
This is a criminal offence under the criminal justice act.

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2
Q

How would you bring an action against insider dealing?

A

Must prove:
- The individual is an insider.
- Must have insider information.
- Committed one of the 3 offences under the criminal justice act.

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3
Q

What is a primary insider?

A

Employee or officer of the company

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4
Q

What is a secondary insider?

A

Someone who gains information from a primary insider.

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5
Q

What is inside information?

A

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.

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6
Q

What are the 3 offences under the criminal justice act?

A
  • Dealing
  • Encouraging others
  • Improper disclosure
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7
Q

What is dealing?

A

Buying or selling shares with inside information.

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8
Q

What is encouraging others?

A

Encouraging other people to act on shares that you hold inside information for.

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9
Q

What is improper disclosure?

A

When you pass on inside information to someone else.

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10
Q

What is the exception to improper disclosure?

A

If it is in proper performance of their job.

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11
Q

If the CPS makes a successful case against the defendant for insider dealing, what defences can the defendant use?

A
  • 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.
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12
Q

What is the criminal penalty for insider dealing?

A

7 years imprisonment and/or unlimited fine.

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13
Q

What are the consequences of insider dealing (apart from prison and fine)?

A
  • 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.
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