Paul Convery and Laura Murdock

A businessman has been convicted of an insider trading offence by Dublin Circuit Criminal Court. This conviction is the first for insider trading in the history of the State and represents an important development in market abuse enforcement and wider securities regulation.

Insider dealing under Irish law

Insider dealing is an offence under Regulation 5 of the European Union (Market Abuse) Regulations 2016, which gives effect in Irish law to the Regulation 596/2014/EU, Market Abuse Regulation. Insider dealing occurs when a person who possesses inside information knowingly buys or sells financial instruments to which that information relates directly or indirectly.

Information will constitute “inside information” when:

• it is precise;
• non-public;
• relates to financial instrument; and
• if it were made public it would be likely to have a significant effect on the price of those financial instruments.

The term ‘financial instruments’ is not limited to publicly traded shares, and includes derivatives and spot commodity contracts.

The offence of insider dealing forms part of Irish market abuse law, which also includes offences of inciting insider trading, market manipulation and unlawfully disclosing inside information. Additionally, under section 1368 of the Companies Act 2014, a person who is guilty of an offence created by Irish market abuse law, is liable to conviction on indictment.

Case background

The accused was a businessman who was charged following an investigation led by the Garda National Economic Crime Bureau into market abuse. It was alleged that the insider dealing occurred between 18 and 22 May 2020. The accused was charged with insider dealing under Regulation 5 of the Market Abuse Regulations and section 1368 of the Companies Act.

At a hearing before the Circuit Criminal Court in September 2023, the accused pleaded “not guilty” to both offences. The Director of Public Prosecutions directed that the accused should be tried on indictment. However, when the case came for mention before the court on 19 October 2023, the accused pleaded guilty to one of the offences. The accused is due to be sentenced in December 2023.

Penalties

The penalties for insider dealing are considerable given its potential to undermine investor confidence in financial markets. Summary conviction for an offence under the Market Abuse Regulations can attract a fine of up to €5,000 and up to 12 months’ imprisonment. Conviction on indictment under section 1368 of the Companies Act can result in a €10,000,000 fine and up to 10 years’ imprisonment.

Significance

The case is the first criminal conviction for insider trading in the history of the State.

In May 2022, the High Court confirmed sanctions imposed by the Central Bank Enforcement Division on a former director and chairman of several public companies, who was found to have engaged in insider dealing in 2008. He was fined €75,000 and disqualified from being involved in the running of a regulated financial services provider for five years. The offences occurred prior to the introduction of the Market Abuse Regulations and there was therefore no criminal conviction.

The significance of this case is somewhat tempered by the fact that the accused pleaded guilty before the details of the offences could be entered into evidence and argued before the court. Whilst the conviction is important in Irish securities law enforcement, judicial interpretation of the constituent elements of the offence of insider dealing under Irish law remains outstanding. We will keep the area under review for future developments.

• Paul Convery and Laura Murdock are partners at William Fry LLP.