Page 277 - Microsoft Word - 00 Prelims.docx

Corporate and fraudulent behaviour

Defences to the offence

The individual has a defence regarding dealing and encouraging others to deal if he
can show that he:

 Did not expect the dealing to result in a profit (or avoidance of a loss)
attributable to the fact that the information in question was price-sensitive

 Had reasonable grounds to believe the information had been widely disclosed

 Would have done what he did even if he did not have the information

 Reasonably believed that the recipient of the information would not act upon it.

If the information is disclosed in the course of an employment or
profession, no offence is committed. For example, if an auditor passes
information to a review partner and the partner then acts upon it, no
offence has been committed by the auditor. (However, the partner may
have committed an offence).

Penalties

The maximum penalties imposed by the statute are seven years’ imprisonment
and/or an unlimited fine.

The transaction itself remains valid and enforceable.

If the individual is a director he is in breach of his statutory duties under CA06 and
may be liable to account to the company for any profit made.

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