M6 insider trading

Question 1

What is inside information?

Answer 1

• specific or precise information which has not been made public
• only known by insiders
• if it was made public, it would likely have a material effect on the price or values of securities or financial instrument

Question 2

Who are the insiders?

Answer 2

has inside information as a result of
- being a director or shareholder to which the information relates
- his profession

OR

a person who has information that knows its source is from one of the above

Question 3

When is an inside trader guilty?

Answer 3

when the insider knows that they have inside information and they:
- deal directly to indirectly with ones own account in the securities to which such information relates
- they deal directly or indirectly on behalf of another person in their securities or financial instruments to which such information relates
- encourages or causes others to deal
- discourages others from dealing
- disclose it to another person (unless he has to, to perform his duties and said it was inside information)

UNLESS
- was acting on specific instructions from a client and the inside information wasn’t disclosed to him by the client
- only became insider after giving the instruction to deal and did not change the instruction after becoming an insider
- was transacting with other parties who also had the inside information and transaction was not aimed at getting a benefit from the inside information

Question 4

What are the consequences of being guilty for inside trading?

Answer 4

• Criminal sanction
• fine of up 50 million
• imprisonment up to 10 years
• Civil Sanction (limited to the following)
• the Profit gained or loss avoided AND
• an amount of 1 million + 3 times the profit gained or loss avoided AND
• interest AND
• costs of the lawsuit