Under the CJA, a person is not guilty of insider dealing by (i) virtue of dealing in securities and/or (ii) encouraging another person to deal in securities if he shows that:
- he did not at the time expect the dealing to result in a profit attributable to the fact that the information in question was price-sensitive;
- he believed on reasonable grounds that the information had been disclosed widely enough to ensure that none of those taking part in the dealing would be prejudiced by not having the information; or
- he would have done what he did even if he had not had the information.1
In addition, a person is not guilty of insider dealing by virtue of a disclosure of information if he shows that he did not at the time expect any person, because of the disclosure, to deal in securities on a regulated market or through a professional intermediary, or that, although he had such an expectation, he did not expect the dealing to result in a profit attributable to the fact that the information was price-sensitive.2
Finally, the CJA includes additional defenses which relate to market makers, market information, transactions, and buy back programs and stabilization programs.3
It should be noted that in English law the burden of proof in criminal cases requires that the prosecution must prove beyond reasonable doubt a defendant’s guilt. This means that historically it has been difficult for prosecutors to secure criminal convictions in insider dealing cases.
1 Criminal Justice Act 1993 (CJA), c. 36, § 53(1) (UK).
2 Id. § 53(3)
3 Id. Schedule 1.