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ACCA Applied Skills · Corporate and Business Law (Global) · Fraudulent and criminal behaviour

Karim, a chief executive, knows that his company's main customer will shortly cancel a contract, which will cut the share price sharply. He gives no information to anyone but sells his own shares through a broker the same morning. He later argues that he sold only to fund a house purchase and not to avoid a loss. Which statement is most accurate?

His stated reason is not automatically a defence. The offence centres on dealing while holding inside information, and he sold before the bad news became public. A defence may arise only if he can show he would have dealt in the same way anyway. Lack of disclosure to others is irrelevant.

  1. AHis reason for selling is a complete defence because he did not intend to avoid a loss
  2. BHis purpose is not decisive in itself; the offence turns on dealing while in possession of inside information, though defences may exist where he can show he would have dealt anywayCorrect
  3. CHe commits no offence because he did not disclose the information to anyone

Explanation

The core offence is dealing while holding inside information. A personal motive such as funding a purchase does not automatically remove liability, although defences may be available if the defendant shows he would have dealt regardless of the information. Option C is wrong because disclosure is a separate offence, and option A overstates the effect of motive.

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