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

Lars, a junior analyst at a bank, overhears that a client company will shortly report a large unexpected loss. He tells his brother Nils, who has no connection with the bank, and urges him to sell his shares in the client. Nils sells at once. Which statement is correct?

Lars may be guilty of improper disclosure and encouraging dealing, and Nils may be guilty of dealing with inside information. The offences do not require the person who tips to deal personally, and the recipient who knowingly trades on information from an insider is also caught.

  1. ALars may be guilty of the offence of improperly disclosing inside information, and Nils may be guilty of dealing while knowingly holding inside informationCorrect
  2. BNeither is guilty because Lars did not himself deal in the shares
  3. COnly Nils is guilty because he alone made a profit or avoided a loss

Explanation

Insider dealing offences generally include dealing, encouraging others to deal, and disclosing inside information other than in the proper course of employment. Lars disclosed and encouraged, so he need not have dealt himself. Nils, knowing the information came from an insider, is a secondary insider who dealt. Option B is wrong as dealing is not essential for Lars.

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