# 1.1 Penalties for insider dealing

As of the CJA 1993, insider dealing is a criminal offence. There are two types of penalties: an unlimited fine and a maximum of seven years’ imprisonment (before 1 November 2021). This has increased to ten years for offences committed on or after 1 November 2021. If individuals are found guilty of insider dealing, the court can impose one or both penalties.

## Box 3 Insider dealing: an example

The investment bank UBS AG recruited Fabiana Abdel-Malek to be its senior compliance officer in its London office. During her employment, she was able to gain inside information and disclosed the information to her family friend, Walid Choucair, a very experienced day trader of financial securities. Choucair was able to make a profit of approximately £1.4 million with the information he gained from Abdel-Malek.

In 2019, a jury at Southwark Crown Court decided that Abdel-Malek and Choucair were both guilty of insider dealing under section 52 of the CJA 1993 and the judge sentenced each of them to three years’ imprisonment (Financial Conduct Authority, 2019).

The purpose of the following activity is to help you understand insider trading and the relevant legislation using a multiple-choice question format.

## Activity 1 Insider dealing

Allow around 15 minutes for this activity

Answer the following questions by selecting the best option:

1. Which statute contains the legislation on insider dealing?

Criminal Justice Act 1993
Companies Act 2006
Proceeds of Crime Act 2002
Bribery Act 2010

### Answer

The Criminal Justice Act 1993 contains legislation on insider dealing.

2. Which of the following behaviours is considered to be insider dealing?

Use inside information to deal in shares/securities.
Encourage other people to use inside information to deal in shares/securities.
Disclose the inside information to the public.
All of the above.

### Answer

All are examples of insider dealing.

3. Which of the following is not a general defence to a charge of insider dealing?

The individual did not expect this dealing to make a profit or avoid a loss.
The individual had reasonable grounds to believe that information had been disclosed widely.
The individual expected other people to benefit from this dealing in shares/securities.
The individual would have done the same if they did not have such information.

### Answer

According to section 53 of the CJA 1993, expecting other people to benefit from the dealing in shares/securities is not a general defence to insider dealing.

4. Which of the following statements is false?

A person has information from an inside source if they have access to the information by virtue of their employment, office or profession.
Insider dealing has been made a criminal offence under section 57 of the CJA 1993.
Inside information is not disclosed publicly.
The person has information from an inside source if the direct or indirect source of their information is a director, employee or shareholder of an issuer of securities.

### Answer

Insider dealing has been made a criminal offence under section 52 of the CJA 1993.

OpenLearn - Corporate fraud and criminal behaviour
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