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Access to inside information for personal dealing
Aaron was a branch manager of a bank. During the years of economic downturn, he had lost almost two-thirds of his wealth by engaging in property and stock market speculations. He was interested in any new opportunities to make quick money to recover his financial losses.
Raymond, a fast-growing machinery company's director, kept his major accounts in Aaron's branch. One afternoon, Raymond visited Aaron's office to discuss an application for a business loan. During the meeting, Aaron's learnt that a well-known listed technology corporation was going to merge with Raymond's company.
Upon hearing Raymond's confidence and optimism for the future of his company and the likely rise of the technology corporation’s stock price, Aaron realised the opportunity for him to make his own tidy profit. Aaron made a quick call to his broker and bought a large quantity of shares of the technology corporation in advance. He also told his brother about this information. A few days later, when the announcement of the merger was made public, the share price rose considerably. Aaron subsequently sold the stocks and made a substantial profit.
Case Analysis
Aaron occupied a position from which he had access to sensitive information about his client's merger plan. He might commit an offence of insider dealing under the Securities and Futures Ordinance and might also breach the Code of Conduct[1] of the bank by leaking client’s information to an outsider without his consent and abusing the information to deal in the stocks for personal gain. Aaron should not deal, whether directly or indirectly, in the shares or other securities of any company listed on The Stock Exchange of Hong Kong Limited when he possessed non-public inside information obtained as a result of his employment.
[1] According to HKMA’s Supervisory Policy Manual CG-3, each authorized institute (bank) should develop its own Code of Conduct containing certain minimum conduct requirements which include “no member of staff should deal in the shares or other securities of any listed company when possessing privileged or price-sensitive information that is not generally known to the shareholders of that company and to the public. Staff should not disclose such information to any third party.”