Corporate & Fraudulent Behavoir

Question 1

What is insider dealing, 3 types of offences?

Answer 1

Dealing in securities in which they have inside information or
Encouraging someone to deal in securities on which they have inside information or
Disclosing inside information

Question 2

How is an Insider defined?

Answer 2

Primary - Someone who is an employee or officer of the company.
Secondary - Someone who gains information from a primary.

Question 3

What counts as inside information?

Answer 3

Information that relates to particular securities or a particular issuer of securities.
The information is specific and precise
The information has not been made public.
If the information were made public it would likely have a significant effect on share price.

Question 4

What defences are there to insider trading?

Answer 4

Did not expect dealing to result in a profit
Had reasonable grounds to believe the information had been widely disclosed.
Would have done what they did in absence of the information
Reasonably beloved the recipient of the information would not act on it.

Question 5

What is the maximum penalty for insider trading?

Answer 5

7 years in prison and/or

An unlimited fine.

Question 6

What is Market abuse?

Answer 6

Overall this is a civil offence investigated by the FCA and includes insider trading.
Behaviour in relation to any qualifying investments.
Regarded by regular market users as falling below reasonable standard.
Falls with in one of three categories:
1. Based on information not widely available but relevant.
2. gives a false impression of market price of shares
3. distorts market value of shares.

Question 7

What is money laundering?

Answer 7

Concealing the proceeds of crime within legitimate business.

Question 8

What are the three layers of Money laundering?

Answer 8

Placement - Bringing property or money in to the business.
Layering - Moving the property/money around in the business.
Integration - Property/money becoming part of the business.

Question 9

What are the three offences under the proceeds of crime act in relation to money laundering?

Answer 9

1. Concealing/Disguising/Transferring/Converting/removing criminal property from the UK
2. Entering in to or being involved in an arrangement that will facilitate acquisition or retention of criminal property.
3. Aquire/Use/Posses property that represents the proceeds of crime.

Question 10

What is the maximum penalty for money laundering?

Answer 10

Unlimited fine or

Up to 14 years in prison.

Question 11

What other offences might relate to money laundering?

Answer 11

Failure to report - by individuals acting within a regulated sector
Tipping off - Basically letting someone know they have been reported to the MLRO.

Question 12

What are the defences against the above?

Answer 12

Reasonable excuse not to report.
Did not know or suspect money laundering.
Not been provided with training.

Question 13

What are the maximum penalties for Failure to report and tipping off?

Answer 13

Failure = 5 years plus unlimited fine.

Tipping off - 2 years plus unlimited fine.

Question 14

What should a money laundering and Terrorist financing risk assessment contain?

Answer 14

1. Should take in to account information from supervisory body on risk factors.
2. The firms customers.
3. The countries or geographic areas the firm operates in.
4. The firms products or services.
   The firms transactions
   The firms delivery channels.

Question 15

What 3 offences does the bribery act 2010 cover?

Answer 15

1. Bribing another person to perform relevant function improperly- offence is offering the bribe, it does not matter if it is accepted
2. Being Bribed - Requesting or accepting a bribe to perform a relevant function improperly.
3. Bribing a foreign official - Giving/offering a bribe to influence performance of official function.

Question 16

What is a relevant function?

Answer 16

Function of a public nature, or function of a business nature.

Question 17

What are the maximum penalties and liability for bribery?

Answer 17

Penalty = 10 years and/or an unlimited fine.

Corporate liability - Commercial organisation can be sued for failing to prevent bribery.

Question 18

What other crimes are there in relation to running/winding up a business?

Answer 18

1. Failure to file accounts = Criminal record and fine of

Question 19

How is Fraud defined?

Answer 19

Intention to make a gain/profit through acting dishonestly.

Question 20

In what ways can fraud be committed?

Answer 20

False representation
Failing to disclose information
Abuse of position.

Question 21

What is the maximum penalty for fraud?

Answer 21

Unlimited fine or ten years.

Question 22

What is failure to prevent tax evasion?

Answer 22

Where relevant body (UK or oversee) is criminally liable if it fails to prevent the facilitation of tax evasion by an associated person.
Associated person = Individual/employee/corporate entity, providing services.
Statutory defence = Relevant body had reasonable prevention procedures.

Question 23

What are the three stages of tax evasion?

Answer 23

1. Criminal evasion of tax.
2. Criminal facilitation of this act by an associated person.
3. Relevant body failed to prevent associated person from committing facilitation.

Question 24

What are reasonable prevention procedures in relation to Tax evasion?

Answer 24

1. Risk assessment
2. Proportionality of risk based prevention procedures.
3. Top level commitment
4. Due diligence
5. Communication
6. Monitoring & Review.

Question 25

What is the maximum penalty for facilitating tax evasion?

Answer 25

Unlimited fine and potential repetitional damage.

Question 26

What is meant by transactions at under value?

Answer 26

Where a company receives no or insufficient consideration.
If this occurs in the 2 years prior to liquidation the court will grant permission to set the transaction aside.
Except:
If the company entered in to the agreement in good faith, on the grounds of carrying on business, believing it to be on reasonable grounds that will benefit the company.

Question 27

What is meant by giving a preference?

Answer 27

Where a company does something to put a creditor in abetter position at liquidation in the 6 months prior to liquidation - 2 years if creditor is a connected person.
The liquidator can be granted permission to ignore the preference when distributing assets.

Question 28

What is the definition of fraudulent trading?

Answer 28

Companies business is carried on with the intent to defraud, any persons knowingly involved are liable.

Question 29

What are the penalties for fraudulent trading?

Answer 29

Contribute to company assets at winding up.
up to 15 years disqualification
Fine and/or 10 years.

Question 30

What is the definition of wrongful trading?

Answer 30

The director was aware the company should go in to insolvent liquidation before winding up commenced and did not take sufficient steps to minimise potential loss to creditors.
All directors and shadow directors are liable.

Question 31

What are the penalties for wrongful trading?

Answer 31

Contribute to company assets at winding up

Up to 15 years disqualification.