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When Suspicious Trading Leads to a Conviction for Insider Trading

Insider Trading

A man admitted in court that he made trades in the shares of a pharmaceutical company (Company A) based on protected information, becoming the first person in the EU member state to be convicted of insider trading under the Market Abuse Regulation (MAR).

The economic crime division of the country’s police force investigated the case based on a report of suspicious trading from the nation’s financial regulator. After extensive research into the matter, they put the case before a court where the man pleaded guilty. He confessed that he possessed inside information relating to the movement of the company’s stock that he used to inform his transactions.

This anonymised case study shows the seriousness with which member states take market abuse and the caution with which companies must handle inside information.

The background

In the late 2010s, a clinical trial service business (Company B) performed a reverse takeover of Company A, taking Company A’s name. Later the same year, the resultant business announced it was merging with a pharmaceutical company in another European country (Company C). 

A year later, the police force confirmed that it was investigating suspicious trading in Company A’s shares, based on the regulator’s advice. The trades took place a few months after the merger announcement, over a four-day period. They were related to a person acquiring and then disposing of shares in Company A.  

Although not directly connected to Company A, this person had been the CEO of a healthcare company (Company D), which was partly owned by Company B. He had stepped down a year before Company B’s reverse takeover of Company A, but the investigators still arrested him to question him about the incident.   

When the case came to court, the former executive pleaded guilty to one count of insider trading, denying another.  


What companies can learn

Company A cooperated with police investigating the incident and issued a statement that claimed the man was unconnected to the organisation. However, although he was not employed by the business at the time, he had previously run an entity within the newly merged company. It is still unknown, though, how the man came to possess the inside information.  

With complex corporate structures, it is essential that businesses are strict over how they handle inside information in order to comply with the legislation. Otherwise, they risk the details being leaked through internal networks and being used to perform insider trading.  

How to mitigate this risk

To make sure you compile insider lists in the correct manner, as stipulated by the European Securities and Markets Authority (ESMA), use InsiderLog. It provides online templates to make generating lists simple, ensuring that you complete the required information. It also automates reminders to insiders to acknowledge their place on the list and reminds them to input their personal information.  

InsiderLog provides an audit trail of when the list was edited and why, helping you present a full picture of the processes you undertook to authorities, if necessary.  

Request a demo of InsiderLog for your business today.  

References and further reading

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