Tim Bennett Explains: Insider dealing – a crime not a perk
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know somebody does so the accountant phoned his friend broke up and the trade
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is done the shares are bought a week later the results were announced they
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rise 25% is there a problem or how many problems that we call you returning to
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that scenario shortly so what is insider dealing right first of all it is a
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criminal offence so the test in a court of law is described as beyond reasonable
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doubt that’s roughly speaking 90% or more certainty it’s not a civil defense
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missile defense ease the burden of proof is lower easier than at people for if
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you like because it’s described as being convinced on the balance of
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probabilities so a jury needs to get beyond reasonable doubt about what three
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things number one an insider is involved but the confusing thing about insider
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dealing is a title is the wit of the number of people in acts that are
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covered by the legislation to an insider is quite a broad definition in a moment
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number to all of the past price-sensitive information is involved
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a number three
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it’s used in a deal used to facilitate a deal buy or sell shares for example or
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it simply passed own son
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although it’s called insider dealing just bypassing all illegal
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price-sensitive information you can be called so who are insiders taking those
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21 in the first of all directors or partners or if you like primary insiders
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they obviously people who have regular access to price-sensitive information
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because they’re running businesses and these are businesses if you think about
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it that are subject to information
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announcement rules and regulations so they’re right in the firing line
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potentially employees because they have close contact with directors artists
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shareholder anyone connected with insider so you get within the law
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what a typed list and then suddenly anybody knows who can be connected to an
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insider a wife a friend a broker doesn’t matter inside information then test who
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is what not publicly available and there are definitions of this example listed
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companies have an obligation to release information to the market at certain
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times about their results are expected to adhere to that change your number to
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price sensitive information which is expected
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reasonably to move a sharp rise up or down people sometimes think insider
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trading is all about getting in early to make a profit can also be about getting
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out early to avoid a lots of thing about one number three there is no intention
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to make a profit or avoid a lot so the guilty mind as lawyers call it comes
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into this you think I’m gonna use that information to make money or avoid
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taking a hit now that’s not a problem how many insiders we got how we got
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insider trading going on and I would argue these people aren’t careful you’ve
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got for insider traders on the screen at least alright because a company director
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is a primary insider and this is likely to be
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price-sensitive information and what he’s done is passed it all they might
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say is passed it on to his wife could be very very careful about doing exactly
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that kind of thing if there is a possibility
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lee’s wife will go and deal you can I’m agent or worse yet she instructs his
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wife to go India thinking it’s not me doing the deal that’s all right now it
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isn’t she is connected to an insider close their accounts and it was also
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connected to an insider and asked him to buy some shares on their behalf well as
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it there’s basically passing on the information hoping someone will use it
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to your benefit he found his friend broke up again and the deal is done now
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whether the broker for example he’s an insider some debate you need to know
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more but I would say potentially you have for insiders heroes lot of people
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with sight 11 isn’t just this guy’s the problem is not what he’s the star the
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problem but the trail goes out quite a lot wider and that’s the point about
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insider dealing you don’t have to be an insider and you don’t have to deal to be
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prosecuted
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ironically enough now if you’re accused of this unique defenses you human
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obviously did you like there are some defense is the trade would have occurred
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at a time anyway I without inside information so sometimes directors trade
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because they need to raise money they’ll sell shares to pay a tax bill school
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fees for argument sake if they can prove that by reason to assume the inflation
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is already in the public domain information which is in the public
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domain account for example on a train you look out the window you see a
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factory on fire
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crikey I know the business that runs out that you found your broker they don’t
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all my stock in that company eww stock share price subsequently plunges is that
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insider dealing no because anybody in theory could have seen the factory was
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on fire
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worked it all out you just happen to be first different did not expect the
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information to be price-sensitive
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prove it did not expect to deal now clearly directors policy information on
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to other directors partners talk to other partners employees talk to each
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other
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provided at doing it in the course of their employment you can say is an
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insider trading otherwise company directors couldn’t share information
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with anybody would clearly be silly but does a company director need to share
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information with his wife even if it’s natural to want to do so after a hard
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day in the office no court argument to be careful equally an apartment in your
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friends no penalties are quite severe up to seven years in prison brews across
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things beyond reasonable doubt as I hurdle seven years in prison or an
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unlimited fine people are surprised by that you know those penalties can be
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applied almost anyone in my original change by the way they have it
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little bit of a warning insider dealing criminal offence definitely not any
