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One trade can produce two entirely different cases. Insider dealing is a criminal offence carrying up to ten years’ imprisonment, and the same conduct is separately prohibited as market abuse, where the Financial Conduct Authority decides the case on the balance of probabilities with no jury involved at all. The question that matters most to anyone under investigation is not what insider dealing means. It is which of those two routes they are on, when that gets decided, and whether anything can be said before it is.
The stage of the case decides the word. Before a charge, a person is a suspect. After a charge, a defendant. In a regulatory case there is no charge at all, and the person is the subject of an investigation. Most of what follows concerns the period when nothing has been decided, which is where this work belongs and where a case is cheapest to change.
Insider dealing has been a criminal offence in the United Kingdom since 1980. The offence in its present form sits in Part V of the Criminal Justice Act 1993, referred to below as the 1993 Act. In outline, an individual who has information as an insider commits the offence if they deal in securities whose price would be affected by that information, if they encourage another person to deal, or if they disclose the information otherwise than in the proper performance of their employment, office or profession.
Three features of that definition catch people out.
The Part V offence applies to individuals. A firm may face regulatory consequences, and its systems and controls may be examined closely, the criminal offence is committed by a person.
An insider is not only a company director. A person has information as an insider where they have it through membership of an administrative, management or supervisory body of an issuer, through a holding in the capital of an issuer, or through their employment, office, profession or duties. It also reaches anyone who has the information from an inside source and knows that it is inside information from such a source.
That is wide enough to cover the professional adviser, the contractor, the temporary worker in the finance team, and the partner who was told about it over dinner.
The encouraging and disclosing limbs do not require the person holding the information to trade at all. Passing information to a friend, a relative or a colleague who then deals in the securities is squarely within the section, and so is encouraging someone to deal without ever explaining why. Many investigations begin with transactions in particular securities and work backwards to a conversation.
This is the most productive ground in most cases, and it rewards precision. Inside information is information of a precise nature, which has not been made public, relating directly or indirectly to one or more issuers or to one or more financial instruments, and which, if it were made public, would be likely to have a significant effect on the price of those financial instruments.
Each limb does work. Information too vague to allow a conclusion about the effect on price may not be precise enough. Information circulating widely may already be public. Information about a company that would move its share price by a trivial amount may not be price-significant.
Not every advantage is inside information. An inference a diligent analyst could have drawn from public sources is not inside information, however valuable it turned out to be. The gap between “knew something useful” and “held inside information” is where a large proportion of these cases are actually fought.
These allegations rarely look dramatic from the inside. The recurring patterns are ordinary.
The common thread is that the person concerned rarely believed they were committing an offence. They believed they had an unfair advantage at worst, which is why the question in almost every case is not what happened but what was known, and when.
Insider dealing is triable either way. A person found guilty on indictment faces a maximum of ten years’ imprisonment, an unlimited fine, or both.
That figure carries a qualification most summaries omit. The maximum was raised from seven years to ten by the Financial Services Act 2021, and the increase applies only to offences committed on or after 1 November 2021. Conduct before that date remains subject to the seven-year maximum. In a long-running investigation into trading spread across several years, that distinction is not academic.
Running alongside the criminal offence is a civil prohibition. The Market Abuse Regulation came into effect on 3 July 2016. Following the end of the Brexit transition period on 31 December 2020 it was onshored into domestic law as the UK Market Abuse Regulation, usually shortened to UK MAR, and it is enforced by the FCA.
UK MAR targets three kinds of behaviour, and it is worth knowing which one is alleged, because they are answered differently.
The regime bites on financial instruments admitted to trading on a regulated market or traded on a trading venue, which is wider than most people assume and reaches well beyond ordinary company shares. Issuers carry their own obligation to disclose inside information to the market promptly, which is why the timing of an announcement is so often the fixed point an investigation is measured against.
Unlike the criminal offence under the 1993 Act, UK MAR is not limited to individuals. Companies fall within its scope too.
The consequences of the civil route are serious in a different way. Under section 123 of the Financial Services and Markets Act 2000, FSMA, the FCA may impose a financial penalty of such amount as it considers appropriate. It may censure a person publicly. It can require disgorgement of any profit made or loss avoided. It may find a breach and prohibit an individual from performing any function in relation to a regulated activity, which for most people in this position ends a career more decisively than a suspended sentence would.
A criminal court must be sure before it convicts. The FCA decides on the balance of probabilities. The same evidence, the same trading records, the same ambiguous message thread, can fail to support a criminal charge and comfortably support a regulatory finding.
There is no jury. The FCA issues a warning notice, then a decision notice, and the route of challenge is a referral to the Upper Tribunal rather than an appeal to the Court of Appeal.
This is the same structural problem faced by anyone in a regulated profession facing a criminal allegation: two processes, two standards, and the career risk frequently sitting in the one that is not the criminal case.
Most people are surprised by both ends of this.
The FCA monitors trading patterns, and it receives reports from firms whose own surveillance has flagged a transaction. A single trade placed shortly before an announcement, in an account connected to someone close to the company, is enough to open a file. Nothing about that requires anybody to have complained, and the person concerned is usually unaware that any of it is happening.
What follows is slow. An investigation of this kind commonly runs for one to two years, and sometimes considerably longer. A person may be interviewed once and then hear very little for months.
That combination of an early, invisible trigger and a long silence is where these cases are lost. The record explaining why a trade was placed when it was placed is at its most complete at the beginning and degrades throughout: mandates are archived, advisers move firms, and the reasoning behind a rebalancing decision stops being something anyone can recall precisely. Waiting to see what the FCA decides is not a neutral act, it is a decision to let that record decay.
The FCA prosecutes criminal insider dealing as well as bringing regulatory proceedings. The same body is therefore choosing between the two routes, and it makes that choice on the material in front of it at the time.
This is the point of the piece. The choice is not announced, it is not formally notified, and by the time it becomes obvious it has usually been made. What sits in front of the decision-maker is the trading record, the communications, and whatever explanation exists for the timing of a trade. If the innocent explanation for that timing is not in the file, the file does not contain it.
That is the same logic that governs a charging decision in any other financial crime investigation, and it is why pre-charge representations matter more in this field than almost any other. Where they succeed, the result can be a no further action decision, or a matter that stays regulatory instead of becoming criminal.
An FCA interview is not a police interview under caution, and treating them as the same thing is the most common and most damaging mistake made at this stage.
Under sections 171 to 173 of FSMA, FCA investigators can require a person to attend and answer questions. Section 173 is the widest of those powers. In a compelled interview there is no right to silence. Declining to answer is itself a matter the FCA can act on.
Section 174 of FSMA restricts the use of compelled answers. They are not admissible against the person who gave them in criminal proceedings, or in market abuse proceedings. That protection is real and it is the reason the compelled interview is rarely the tool used against someone the FCA is considering prosecuting.
The protection stops there. Compelled answers can be used in other regulatory proceedings, including proceedings to fine an individual or to prohibit them from the industry. A person can therefore give an account under compulsion that cannot convict them, and can still end their career.
Understanding which kind of interview has been requested, under which power, and what the answers can later be used for, is the work to be done before attending rather than afterwards. The same applies where an investigation opens with a dawn raid by the SFO or FCA.
Insider dealing allegations rarely arrive alone.
We act for individuals facing insider dealing and market abuse allegations, and most of the value we add is delivered before anything is decided.
In practice that means reconstructing the decision chain behind each trade while the record is complete, establishing what our client actually knew and when they knew it, testing whether the information relied on was genuinely precise, non-public and price-sensitive, and putting that analysis to the FCA in writing before it commits to a route. Where the timing of a trade has an innocent explanation in a mandate, a pre-existing plan or a rebalancing decision, that explanation needs to be evidenced now rather than asserted later.
Where someone has already been charged, the proactive work continues. The same analysis can be put to the prosecution as the basis for a review of the charging decision, and in the right circumstances a case can be discontinued rather than won at trial. This forms part of our wider financial crime defence practice.
These cases look like arguments about trades. They are arguments about what a person knew at the moment they made a decision, and about which of two very different tribunals gets to decide it.
We offer confidential consultations, in person at our London offices or remotely by secure call. Initial enquiries are handled discreetly and quickly.
If you have received a request to attend an FCA interview, or notice that your trading is being examined, the position to establish first is which power is being used and what your answers can later be used for. Speak to our team before you attend.
Insider dealing is a criminal offence under section 52 of the Criminal Justice Act 1993. An individual who has information as an insider commits it by dealing in price-affected securities, by encouraging another person to deal, or by disclosing the information outside the proper performance of their employment, office or profession.
Up to 10 years’ imprisonment on conviction on indictment, an unlimited fine, or both, for offences committed on or after 1 November 2021. The maximum was 7 years for earlier conduct, having been raised by the Financial Services Act 2021.
Insider dealing is the criminal offence. Market abuse is the civil prohibition enforced by the FCA under UK MAR, which covers insider dealing, unlawful disclosure of inside information and market manipulation. The criminal court must be sure; the FCA decides on the balance of probabilities.
Yes. Under section 123 of the Financial Services and Markets Act 2000 the FCA can impose a financial penalty, censure a person publicly, and prohibit them from performing functions in a regulated activity, without any criminal charge being brought.
In a compelled interview under sections 171 to 173 of FSMA there is no right to silence, and a refusal to answer is itself something the FCA can act on. That is a fundamental difference from a police interview under caution.
Compelled answers are not admissible against the person who gave them in criminal proceedings or in market abuse proceedings. They can be used in other regulatory proceedings, including to fine or to prohibit. The protection is narrower than most people assume.
No. The civil case is decided on a lower standard of proof by a different decision-maker. The same evidence can fail to convict and still support a finding that ends a career.
Take advice before responding to any request, and preserve the record of why each trade was placed: mandates, plans, instructions, research and the sequence of communications. That material is at its most complete now. You can contact our team directly for a confidential discussion.
Lex Vindico Group is regulated by the Solicitors Regulation Authority. We represent individuals nationally across England and Wales in criminal, regulatory, and parallel-proceedings defence at every stage, and most decisively, at the pre-charge stage.
This article is written by Akram Mula, LLM, Solicitor Advocate and CPS-approved Prosecutor, founder of Lex Vindico Group. It is general legal information about insider dealing and market abuse, not legal advice on any specific case. For advice on your specific circumstances, contact our team directly.
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