Published on: 10 Aug 2015
You don’t have to be working inside a company to be charged with insider dealing.
Insider dealing is where a person uses information which is not in the public domain to make money out of share price movements.
A typical example of insider dealing would be where an individual works for a company whose shares are quoted on a stock exchange. The individual becomes aware that the financial results of the company which are about to be released to the public are better than expected. Before this information is made public though the individual buys shares so that he or she can sell them for a profit when the unexpected good news about the financial results is made public and the share price increases.
In other words, the individual is making a financial gain by “dealing” in shares using information which is “inside” the company and not available outside of the company. Hence the name “insider dealing”.
Insider dealing is illegal and action taken by the authorities against individuals involved in insider dealing is normally taken against employees of the company in question who are undertaking the insider dealing and / or their friends or associates who may have been involved in the insider dealing activities.
Recently though there was an unusual case where it was announced that federal investigators in the US had broken an insider trading gang who had a rather different approach.
Their unusual approach was that rather than working for the organisation who were about to release their results the gang instead hacked into the systems of financial newswire services to get hold of press releases of companies who were about to release their financial results.
The key thing though was that by hacking into the systems of the newswire services they got hold of these press releases before they were made public and used the information in the press release to purchase shares before these shares increased in value once the results were made public by the press release.
This was a pretty sophisticated criminal activity as it was reported that more than 100,000 press releases were stolen and as a result over $100 million of illegal profits were made by the gang.
The gang was said to have been run from Ukraine and 32 people have been charged in connection with the offence.
In conclusion therefore, you can be outside the company and still be charged with insider trading.