Ireland’s first criminal conviction for insider dealing

Ireland recently saw, for the first time in its history, the criminal conviction of an individual for insider dealing. The individual in question, Mr Declan Service, described in reports as a businessman from Portrush in County Antrim, has served as a director of various Irish companies since at least 2007 according to CRO records.

Mr Service was convicted after pleading guilty to one charge of possessing information used in acquiring and disposing of financial instruments between 18 May and 22 May of 2020, contrary to the European Union (Market Abuse) Regulations 2016 (the Market Abuse Regulations) and section 1368 of the Companies Act 2014 (the Act). The Market Abuse Regulations give effect to the Market Abuse Regulation (EU) No. 596/2014 (MAR) and the Market Abuse Directive 2014/57/EU which are the primary EU legislative items on market abuse replacing Directive 2003/6/EC. Section 1368 of the Act deals with conviction on indictment of offences under the Irish market abuse laws and provides for maximum penalties of a fine of up to €10m, a term of imprisonment of up to 10 years, or both. It has been reported that sentencing will take place on 20 December of this year.

Insider dealing is contrary to regulation 5 of the Market Abuse Regulations, which provides that a person who engages or incites others to engage in specific conduct is guilty of an offence. The proscribed conduct is, while being in possession of ‘inside information’ in relation to financial instruments, engaging or attempting to engage in the acquisition or disposal of such financial instruments for the individual’s own account or the account of a third party and/or the cancelation or amendment of an order for such financial instruments that was placed before the individual came into possession of the inside information (as well as undertaking similar conduct relating to auctioned emission allowances and related products). Inside information is defined in MAR as information which is “of a precise nature, which has not been made public, relating, directly or indirectly, to one or more issuers or to one or more financial instruments, and which, if it were made public, would be likely to have a significant effect on the prices of those financial instruments or on the price of the related derivative financial instruments”. This is often rendered as material non-public information or MNPI.

While sanctions had been imposed by the Central Bank of Ireland’s Enforcement Division last year on a former public company director for conduct which took place in 2008 (before the introduction of the Market Abuse Regulations), this is the first criminal conviction for insider dealing in Ireland. As a guilty plea was entered by Mr Service, we have not had the benefit of judicial scrutiny of the relevant conduct as it relates to the elements of the offence, which would almost certainly have made for illuminating reading.

This case does, though, illustrate the continued attention being paid by regulators and the courts to business dealings and serves as a reminder that stakeholders, rightly, have high expectations of the conduct of our business leaders. It should serve as a note for caution for those of us who (through our professional activities perhaps) may at times be in possession of MNPI to take care to follow best practice when in possession of such MNPI to avoid any suggestion of improper conduct.

For more information in relation to this topic,  Liam Murphy, Senior Knowledge Lawyer or any other member of ALG’s Corporate and M&A team.

Date published: 7 November