Insider dealing and short selling

[madeeha]

what is meant by insider dealing and short selling


madeeha

[sajjad_dar2000]

<blockquote id="quote"><font size="1" face="Verdana, Tahoma, Arial" id="quote">quote<hr height="1" noshade id="quote"><i>Originally posted by madeeha</i>
<br />what is meant by insider dealing and short selling


madeeha
<hr height="1" noshade id="quote"></font id="quote"></blockquote id="quote">

the criminal justice act 1993 makes insider dealing a criminal offence.

<u>Insider</u>

insider is a person who has information if
1) the information is, and he knows that it is, insider information, and
2) he has the information, and he knows that he has it, from an insider sources

<u>Insider Information</u>

1) relates to particular securities or to a particular companies; and
2) is specific or precise; and
3) has not been made public; and
4) is price sensitive

there are two type are insider

Primary Insider
a) he has information through being director, employee or shareholder or
b) through having access by virtue of his job

Secondary Insider
he has information directly or indirectly from a person in category (a) or (b).

<b>INSIDER DEALING</b>

now i come to your question, any deal involving insider information is Insider Dealing which is criminal offence and there are three offences of insider dealing;

1) DEALING in securities on a regulated market (bying+selling)
2) ENCOURAGING another person to deal
3) DISCLOSING information (otherwise than in the proper performance of his job

EXAMPLE OF INSIDER DEALING
following is an example to understand the insider dealing

Assume you are a director of ABC plc and in board meeting it has been disclosed that this year company made double profit with compare to previous year. This information has not been disclosed to public. Now you are insider (because you have insider information) therefore if you buy the share of ABC plc that would be Insider Dealing and you are committing offence number one (1) (above…DEALING).

Assume you don’t buy the share of ABC plc but instead you phone to one of your friend and says to him “I cant tell you why but buy the share of ABC plc as much as you can”, here you are committing offence number two (2) ENCOURGING

Assume you don’t buy the share of ABC plc you didn’t encourage anyone to buy the share but you tell one of your friend that ABC plc made good profit this year, here you are actually disclosing secret/insider information and committing the offence number three (3) DISCLOSING.


I would recommend to read this topic very carefully because it is an important topic for exam and examiner could ask you following questions (section A)

What is Insider Dealing? (3 marks)
Who is insider? (3 marks)
What is insider information? (3 marks)
Consequences of insider dealing (3 marks)
Defences of insider dealing (3 marks)
Offences of insider dealing (3 marks)



Sajjad dar

[admin]

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[sumaaan]

To make it easy and simple for you, Insider Dealing is acting upon information that is not publicly available (i.e. getting confidential information from a source within an entity).

Short selling in very simple words is like borrowing stocks, derivates, etc. from someone and selling them at a higher price today, and buying it again at a lower price after some time.

[Goodman]

[code]Insider Dealing is acting upon information that is not publicly available[/code]

Incorrect.
you can forecast information that is publicly not available and on that basis make investment decisions. Such an exercise is not insider dealing.
example you see vodafone directors jetting off to china. You immeidately work out that they are not going for holidays instead there is a potential deal in the pipeline. on that basis you move your investment portfolio around and it materialises. Now the information was not public and no insider dealing happened.

insider dealing cant be generalised but I believe what sajjad dar wrote is quite reasonable.

[sumaaan]

<blockquote id="quote"><font size="1" face="Verdana, Tahoma, Arial" id="quote">quote<hr height="1" noshade id="quote"><i>Originally posted by Goodman</i>
<br />[code]Insider Dealing is acting upon information that is not publicly available[/code]

Incorrect.
you can forecast information that is publicly not available and on that basis make investment decisions. Such an exercise is not insider dealing.
example you see vodafone directors jetting off to china. You immeidately work out that they are not going for holidays instead there is a potential deal in the pipeline. on that basis you move your investment portfolio around and it materialises. Now the information was not public and no insider dealing happened.

insider dealing cant be generalised but I believe what sajjad dar wrote is quite reasonable.
<hr height="1" noshade id="quote"></font id="quote"></blockquote id="quote">

Yeah, thanks for the correction. The 'mosaic theory' still holds.

[ibrishah]

First of all we shall know who is an insider.
As per Listed Companies(Prohibition of insiders trading) Guidelines Insider is
a) A person who is director,CEO,managig agent, chief accountant, secratary or auditor of a listed company or the benificial owner holding directly or indirectly not less than 10% of shares of a listed company; or
b) a person who is or was connected with the company or is deemed to have been connected with the company and who is reasonably expected to have access bt virtue of such connection to unpublished price sensitive information in respect of securities of the company who has recieved or has had access to such unpublished price sensitive information.
now comming to point insider dealing is
where a person ( a mentioned above ) buys or sell securities when he in possession of such confidential knowledge which effect the value of such securities.

Ibri

[fahim239]

according to insider trading rules insider means "any director chief exective managing agent chief accountant secretary,auditor of a company or a person holding not less than 10% of the beneficial ownership of a company"

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