Happy New Year and Blog Statistics

We all love statistics, well I do. So here is some self-indulgence.

Our Law in Action's page views for the month of December 2010:

Pageviews yesterday 1

Pageviews for whole month 101

Pageviews all time history 159

Looks like you readers are enjoying the regular postings

Here are our global audience figures (for the period May 2010- January 2011)

United Kingdom 106 United States 20 Russia 15 Croatia 4 Germany 3 Singapore 3 Israel 2 Slovenia 2 Hong Kong 1 Ireland 1

I look forward to posting on a broader range of legal issues as well as some discussions on trading in 2011-2012.

Insider Trading - White Collar Crime

Market Manipulation is still a crime - Credit: LegalMatch

Being an active trader on the London Stock Exchange, white collar crime and the offence of insider trading in particular are areas of personal interest. I recently came across an interesting case on Insider Trading (or dealing). In his book Stock Market Efficiency - Market Abuse, Paul Barnes details the case of Insider Dealing with a tip off related to Lord Alan Sugar's Company Viglen in 2000.

I have written a quick overview:

During this pre-dot com boom era a tip off was received by the Daily Mirror that Viglen was on the verge of venturing into selling it's products online. The Mirror published this in it's City Slickers Column, following with Viglen experienced a significant rise in its share price.

The day before the tip was received Piers Morgan, the then editor of the Mirror purchased £67,000 worth of Viglen shares. Investigating Viglen's booming share price the London Stock Exchange forwarded the matter to the DTI (Department for Trade & Industry) who considered whether there had been a breach of Insider Trading statue.

The investigation showed there had been Insider Trading conducted by Hipwell, Bhoryul and Shephard. The DTI's view was that the tip was a 'deliberate act of manipulating the market by ramping the share price from which they were able to profit.' (DTI, 2001).

Hipwell and Bhoyrul were sacked from the Daily Mirror for gross misconduct and the Press Complaints Commission criticised the actions of all three as well as Piers Morgan. Hipwell, Bhoryul and Shephard were charged with Consipiracy under s1(1) Criminal Law Act 1977 to contravene s.47(2) Financial Services Act 1986. This is only one of the few convictions for Insider Trading in England and Wales. The DTI did not pursue Piers Morgan for Insider Trading.

_______________________________________________________________

I have outlined the majority of the current Insider Trading offences below.

There are two approaches to I.D. in UK Law:

1) Old approach - Insider Trading is a Narrow Offense

Pre 1989 EC Directive: 1980 CA and 1985 Companies Securities Act (inspired by US I.D. law)

Classical Theory of liability= founded on the insider’s fiduciary duty to company

...to disclose the information to the counter party... or not pursue dealing

Or with respect to passing inside information to another (tippee)... in breach of fiduciary duty to the company...

and where the tippee knows or should know that there has been a breach of fiduciary duty... thus the tippee is also affected by the same trusts as the insider.

Individual must have a fiduciary relationship to the company (usually only including Directors)

Directors owe a fiduciary duty to company as a whole...

2) Contemporary Approach - Insider Trading is a Wider Offense

Post 1989: 89/592/EEC & CJA 1993:

Fiduciary duty not a prerequisite

By managing I.D. (issue of CAPITAL MARKETS) with the provisions on I.D. it is clear that UK company law (with emphasis on fiduciary duty to the company) has migrated to securities law.

UK law on I.D. à Governed by: CJA 1993

- Influenced by EC Directive 89/592/EEC

- Designed to coordinate regulations in the EU on insider trading amongst member states (many of which didn’t have laws regarding it)

Outline of offenses

s.52 (1)

Insiders dealing in “price-affected” securities using “inside information”

Elements of the offense:

· Offense must be committed by an individual

· Individual must have information as an “insider”

· Individual must “deal”

· In “price-affected securities”

· “In relation to the information”

· As per s.52 (3) acquisition/disposal on the regulated market – dealing themselves/ professional intermediary...

Two Inchoate I.D. offenses

s.52 (2) (a) Insiders Encouraging others to deal in price-affected securities

Encouraging

· Offense must be committed by an individual

· Individual must have information as an “insider”

· Encourage another to “deal”

· In “price-affected securities”

· “In relation to the information”

· Knowing/having reasonable cause to believe the dealing would take place... As per s.52 (3) acquisition/disposal on the regulated market – dealing themselves/professional intermediary...

s.52 (2) (b) Insiders Disclosing the information to another person

Disclosing

· Offense must be committed by an individual

· Individual must have information as an “insider”

· Discloses it to another – other than in the functions of his employment

· In “price-affected securities”

· “In relation to the information”

Disclosing Offense(s)

s.52 (1)

Dealing in the price-affected securities

s.52 (2) (a)

Encouraging another to deal in the price-affected securities

s.52 (2) (b) + s.52 (3)

Disclosing information

Ministry of Justice - Reforms 2010

The Ministry of Justice Business Plan 2011-2015 makes for interesting reading. As Michael Howard said in 1993, 'Prison works'. Based on this report, this doesn't seem to be the Coalition's message. The Coalition's is focused on lowering prison numbers, whether that is done by giving more power to Judges on sentencing or with developing rehabilitation initiatives, to lower the offending rates of detainees once they leave prison.

Whilst this approach may be logical and more efficient in its conception, the cost cutting motivations behind this new direction of the Ministry of Justice are questionable. It is the reduction in funding for the Ministry, which has initiated these new measures, which the Coalition hope lower Prison numbers, thereby saving the Department a considerable amount (in light of the fact that the average cost per prisoner place is above £30,000).

Whether this is sustainable in the long term remains to be seen.

WikiLeaks, Allegations & EU Law

As a prelude to this post I must disclose that I am a neutral party. I do not favour Mr Assange as 'a messiah' for his WikiLeaks publications, in fact I disagree with his views that all of what is said by government (however irrelevant) behind closed doors, needs to be transparent. How can we as UK Citizens and Members of the EU really have purport to have 'free speech' per say when we are encumbered with restrictions on what can be said, on Radio, TV, in person and with what is published in the Media. Whilst I agree that this is in the protection of reputations, all we have is 'constrained free speech'.

Pictured: Julian Assange - More Leaks than a Plumber could fix - Courtesy: Gaurdian.co.uk

Not only has Mr Assange's activities brought into question the issue of "Free Speech" (notably a right not clearly formalised within the UK Constitution) but it has also called the functioning of the EU's Law Enforcement Procedures into doubt.

We are all aware of the ongoing saga surrounding the WikiLeaks founder Mr. Julian Assange. Currently being held at Wandsworth Prison, Mr. Assange is facing extradition to Sweden as a result of the European Arrest Warrant (EAW) issued against him. A tool of the Judiciary the EAW introduced in 2004 allows EU Member States to enforce their national laws. If an individual is charged with an offence or is serving a Prison sentence in a Member State and flees the country, the State's Courts can issue an EAW. This calls for the arrest of the individual in question within the EU member states, so that the person in question can return either to face the charge, being put on trial or returning to complete the remainder of a prison sentence.

Mr Assange has yet to be formally charged with rape, it remains as an allegation. So this clear misuse of the EAW has meant Mr Assange is being held in detention (for an unclear amount of time) without charge. Mark Stephens, the lawyer acting for Mr Assange has outlined that up til now that his client has complied Swedish authorities in this rape claim allegation, but yet no charge was ever brought forward. Guilty before being proven innocent?.

Is this simply a manhunt? brought on by the recent WikiLeaks US Diplomatic Cables publications? Or a just and fair EAW, issued as a result of evidence against Mr Assange in the rape claims?

The issuing of the arrest warrant without any clear grounds is clearly a misuse of its purpose. Sweden should have undertaken further investigations into these allegations before issuing the EAW. This suggested alternative would have been a more proportional action, and by implication the actions of Sweden are in breach of the EU principle of proportionality.

The EU should impose stricter regulations on the circumstances with which issuing EAWs can be authorised, with non-complying member states facing punishment. Alternatively as any UKIP supporter would agree the UK could to reconsider its position within the EU, or at the very least raise this as a point of contention .

Undoubtedly pressure from America caused the issuing of the EAW with such haste following the Cables revelations.

But only time will tell.... and maybe another WikiLeaks publication no doubt.

Update

Mr Assange's claim for Bail is being heard at Westminister Magistrates Court with a reported hefty £240,000 for bail. this is before he is case for extradition to Sweden is to be heard. His lawyer Mr. Stephen Hunt has described the 'Dickensian Conditions' Mr Assange has endured at Wandsworth Prison where he has been held.

Pictured: Wandsworth Prison - Maybe Sweden isn't so bad after all? Source: Click me