Little Book of Insider Dealing

Gregory Durston

Description

Suitable for beginners and practitioners alike. The first concise treatment and highly topical. A gem for finance industry professionals, lawyers and students as well as ordinary investors (who like everyone else must avoid putting themselves at risk).

Sujets

• Droit et juridique

Informations

• Publié par: Waterside Press
• Date de parution: 07 février 2018
• Nombre de lectures: 0
• EAN13: 9781910979518
• Langue: English

Extrait

The Little Book of Insider Dealing
Gregory Durston and Mohsin Zaidi
Copyright and publication details
ISBN 978-1-909976-53-5 (Paperback)
ISBN 978-1-910979-51-8 (Epub E-book)
ISBN 978-1-910979-52-5 (Adobe E-book)
Copyright © 2018 This work is the copyright of Gregory Durston and Mohsin Zaidi. All intellectual property and associated rights are hereby asserted and reserved by the authors in full compliance with UK, European and international law. No part of this book may be copied, reproduced, stored in any retrieval system or transmitted in any form or by any means, including in hard copy or via the internet, without the prior written permission of the publishers to whom all such rights have been assigned worldwide.
Cover design © 2018 Waterside Press by www.gibgob.com
Printed by Lightning Source.
Main UK distributor Gardners Books, 1 Whittle Drive, Eastbourne, East Sussex, BN23 6QH . Tel: [phone]; [e-mail] ; www.gardners.com
North American distribution Ingram Book Company, One Ingram Blvd, La Vergne, TN 37086, USA. Tel: [phone]; [e-mail]
Cataloguing-In-Publication Data A catalogue record for this book can be obtained from the British Library.
e-book The Little Book of Insider Dealing is available as an ebook and also to subscribers of Ebrary, Ebsco, Myilibrary and Dawsonera.
Published 2018 by
Waterside Press Ltd
Sherfield Gables
Sherfield on Loddon, Hook
Hampshire RG27 0JG.
Telephone [phone]
Online catalogue WatersidePress.co.uk
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Contents
Copyright and publication details ii
Publisher’s note vii
Acknowledgements viii
About the authors ix Introduction 11
Setting the Scene 11
R v Ryan Willmott 14
Other jurisdictions 15
Rationale for Proscription 16
Arguments for legalised insider dealing 17
Historical Context 17
Extent of Insider Dealing in the 21st-Century 25 Identifying and Investigating Insider Dealing 29
Identifying Insider Dealing 29
Whistle-blowing and broker observation 29
Complex Event Processing (CEP) 31
Reporting Suspicious Transactions 32
FCA Monitoring 34
Investigating Insider Dealing 35
The Investigative Interview 36
The Decision to Prosecute 41
The Two-Stage Test 43
Consequences of the Decision as to Forum 50 The Regulatory Regime 53
Introduction 53
Advent of the Civil Wrong 53
The Legislation 54
Standard of Proof in Regulatory Actions 55
Going to the Regulatory Decisions Committee 57
The RDC Decision 58
Reference to the Upper Tribunal 59
Regulatory Penalties 61 The Criminal Offences 65
Preliminary Matters 65
No Need for a Tangible Benefit 65
Natural Persons 66
Absence of Dishonesty 66
Fraud Act 2006 68
The Three Offences 68
Interpretation of Section 52 70
Elements of the Offence 72
Dealing 73
The Securities 74
Designated Markets 75
Territorial Scope 76
Insiders 77
Knowledge 77
Inside Source 79
Inside Information 81
Particular 82
Specific or Precise 84
Not Made Public 87
Likely to have a significant effect on price 92 The Statutory Defences and Punishment 97
Introduction 97
Section 53: The General Defences 98
Defences and the Burden of Proof 98
Impact of the Human Rights Act 1998 99
Section 53(1)(a) 102
Section 53(1)(b) 102
Section 53(1)(c) 103
Section 53(2)(a)-(c) 105
Section 53(3) 105
The Schedule 1 Defences 106
Market makers 107
Market information 107
Buy-back programmes and stabilisation 107
The Punishment of Insider Dealing 107 Evidential Perspectives 115
Introduction 115
Nature of the Hearings 115
Expert Evidence 116
Absence of Intercept Evidence 119
Serious Organized Crime and Police Act 2005 122
Sentence Reduction 123
Immunity 124
Good Character of Defendants 125
Suspicious Behaviour 126
Circumstantial Evidence 127
Rejection of mathematical models 130
Cost 132 FSA/FCA Prosecutions 135
Introduction 135
Advent of the FSA 136
A Change in Approach 138
Typical Prosecutions 140
The Indictment 143
Conspiracy or Substantive Offences? 144
Smoking Guns and Careless Defendants 146
The First Three Contested Cases 148
The First Acquittal 151
Another Acquittal 152
Other Early FSA Cases 153
Low Hanging Fruit 155
Tabernula and other High Level Fruit 156 Conclusion 159
Introduction 159
‘Successful’ Insider Dealing 160
Success 163
Concern 164 Part V Criminal Justice Act 1993 (as amended) 166
The offence of insider dealing 166
Interpretation 168
Miscellaneous 173
Schedule 2 174
Frequently Used Acronyms 177
Select Bibliography 179
Index 183
Publi sher’s note
The views and opinions expressed in this book are those of the authors entirely and are not necessarily shared by the publisher. Readers should draw their own conclusions about any claims made or any facts or opinions stated in the book concerning which the possibility of alternative interpretations, narratives, descriptions, subtleties of terminology or developments not sufficiently reported or in the public domain at the time of writing, or which may have occurred since that time should be borne in mind.
Acknowledgements
We would like to acknowledge the invaluable assistance provided by the staff at Kingston University Library, Lincoln’s Inn Library, the London School of Economics Library, the Bodleian Law Library, University of Monaco Library and the British Library. Additionally, we are extremely grateful for advice and assistance from Judge Nicholas Philpot, Victor Temple QC, and Philippa Russell. Readers should note that abbreviated titles are sometimes used in footnotes; the full versions of these sources can be found in the Select Bibliography . Some newspaper citations refer to electronic editions.
Gregory Durston
Mohsin Zaidi
London, January 2018
About the authors
Gregory Durston is a barrister-at-law who has taught in Law Schools in England and Japan. He was Reader in Law at Kingston University, Surrey and is the author of Whores and Highwaymen: Crime and Justice in the Eighteenth-Century Metropolis (Waterside Press, hardback 2012; paperback 2016) and Fields, Fens and Felonies: Crime and Justice in Eighteenth-Century East Anglia (Waterside Press, 2016).
Mohsin Zaidi is a barrister in practice at 6KBW College Hill specialising in corporate crime and investigations. Before transferring to the Bar, he was a solicitor at Linklaters LLP where he worked on a number of complex and high profile matters, including major investigations into FTSE 100 companies and financial institutions. In 2013, he was appointed judicial assistant to Lords Sumption and Wilson at the Supreme Court of the United Kingdom. He is a member of the Serious Fraud Office Prosecutions C Panel and also of the New York Bar. Mohsin read Law with European Law at Keble College, Oxford University and thereafter worked as a research assistant to an academic at Harvard Kennedy School of Government.
Chapter 1
Introduction
Setting the Scene
A front page headline of The Times newspaper recently announced ‘City traders getting away with abuse of markets — insider deals by white-collar criminals ignored’. 1 This timely and concise work aims to provide the reader, whether student, professional or interested member of the public, with a brief introduction to the crime of insider dealing (or ‘ trading’ as it is often termed, especially in the USA) within the UK, with particular reference to England and Wales, and with a special focus on the evidential problems raised by such cases. It is not a substitute for the leading practitioner texts on the subject (on which it has drawn) or for reading the relevant cases (where they have been reported) and Statutes. 2 It has been written to provide a reasoned analysis of the subject, accompanied by comments and references to stimulate further study. The book concentrates on the issues posed by typical offences that come to trial, rather than on the crime’s more theoretical and recondite aspects. Nevertheless, to make sense of the topic, its prevalence, history, the rationale for its existence and its close relationship to (civil) regulatory actions for insider dealing are also considered. Before going further a general description of terms is necessary.
One of the most important markets in which insider dealing occurs in the UK is that relating to shares traded on the London Stock Exchange (LSE). However, as will be seen, many other markets, both at home and abroad, are also covered by the current UK criminal regime. If investors in these markets slowly become aware that a company listed on them is doing very well or, conversely, is in serious difficulties, its share price will gradually rise or fall to reflect this. By contrast, the public announcement of previously unexpected news, whether good or bad, can occasion sudden major price movements in a company’s shares. UK companies that are publicly listed are obliged to publish price-sensitive information that affects them through a Regulatory Information Service (an approved newswire service), such as the LSE’s own Regulatory News Service (RNS), in an expeditious manner. Once published, investors and the media will quickly pick up the information and react accordingly.
Typically, a takeover bid might push up the share price of a company, because the bidders will almost invariably have to offer a relatively high price to persuade the owners of shares to part with their holdings. Conversely, profits warnings of unexpectedly bad results will drive the share price down. (‘ Short-selling’ and spread-betting, inter alia , allow investors to make a profit on a share’s fall). 3 These are easily the two most common causes of sudden share volatility, and so of insider dealing. For example, in R v Asif Nazir Butt [2006] 2 Cr App R (S) 44, 19 transactions conducted over more than three years formed the basis of the allegation of insider dealing. They were allegedly founded on informatio