Insider Dealing 101

What Is Insider Dealing and Why Is It Illegal?

What is insider dealing? Insider dealing is a term used to describe when someone with inside information about a company uses that information to benefit themselves or others. This can be done by buying or selling stocks based on that information, or by giving the information to someone else so they can make an investment. Insider dealing is illegal in most countries, and it can lead to hefty fines and even prison time. In this blog post, we will discuss what insider dealing is and why it is illegal.

What qualifies as insider dealing?

So, what exactly qualifies as insider dealing? Generally speaking, insider dealing refers to any type of trading that is based on material, non-public information. This could be information about a company’s financials, plans for the future, or anything else that would give someone an advantage in the stock market. It’s important to note that not all insider information is illegal – it only becomes illegal when it is used for personal gain.

What are the two types of insider dealing?

There are two types of insider trading: legal and illegal. Legal insider trading occurs when someone with inside information uses that information to make trades that benefit themselves or their employer. Illegal insider trading happens when someone uses material, non-public information for personal gain. For example, if you were to buy shares in a company knowing that it was about to be acquired, you would be committing illegal insider trading.

Why are insider dealing rules important?

Insider dealing rules are important because they level the playing field for all investors. If insider dealing were legal, then only those with inside information would be able to make profitable trades. This would put regular investors at a disadvantage, and it could lead to manipulation of the stock market.

How to catch someone insider dealing?

Insider dealing is notoriously difficult to catch, as there is often no paper trail linking the trader to the insider information. However, there are some red flags that investigators look for, such as unusual or large trades made shortly before a major announcement. If you’re suspected of insider trading, you can expect a lengthy investigation into your activities.

In the UK, insider dealing is investigated by the Financial Conduct Authority (FCA). If you’re found guilty of insider dealing, you could face a fine of £100,000 or up to seven years in prison. The UK’s insider dealing legislation covers a wide range of activities, including market manipulation, false trading, and insider dealing.

So there you have it – everything you need to know about insider dealing and why it’s illegal. Stay safe out there, and remember not to trade on material, non-public information! For more information on this topic, contact Richardson Lissack today!

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