Resources
Case Studies
Conspiracy in insider dealing
Dominic is a sales manager of a brokerage company and he has a few corporate clients. One of his clients is a listed company named Treasure Hunt. During a cocktail reception, the financial controller of Treasure Hunt, Tony, talks to Dominic about his plan to make some short-term financial gains. According to Tony’s knowledge, an international corporation is planning to inject capital into Treasure Hunt, and he foresees its share price will rocket up if the deal is made. Tony, therefore, suggests to collaborate with Dominic to buy Treasure Hunt shares in advance.
With keen interest, Dominic further proposes to purchase the stocks through an external broker in order to disguise their identities. A week later Treasure Hunt announces the capital injection arrangement and, as anticipated, its share price goes sky-high. Dominic and Tony, having made a good profit, immediately sell their shares.
Case Analysis
Dominic violates the *Codes of Conduct as well as the insider dealing provisions of the Securities and Futures Ordinance. He commits an insider dealing offence because he has used non-public information, provided by an insider of Treasure Hunt, to purchase the company’s stocks for financial gain. Tony is regarded as an insider under the law because he is a person who, being the financial controller of Treasure Hunt, has access to confidential information relating to the company.
Tony and Dominic may also commit a corruption offence under Section 9 of the Prevention of Bribery Ordinance (POBO) because Tony accepts from Dominic a share of the profit from the insider dealing as a reward for leaking the confidential information of his company to Dominic. Tony may commit an offence of accepting a bribe while Dominic may commit an offence of offering a bribe.
*Remarks: Codes of Conduct refer to the Code of Conduct for Persons Licensed by or Registered with the Securities and Futures Commission, the Code of Conduct for Corporate Finance Adviser and the Fund Manager Code of Conduct.