The criminal offence of insider dealing should be removed, leaving the civil offence.

Currently insider dealing is treated as either a civil or a criminal offence. There is no clear pattern as to which route the cases will go, although the FSA have made clear that their preference is the criminal offence.

In the case of a civil offence there is a fine levied- now a substantial fine. In the case of a criminal offence (under Part V of Criminal Justice Act) the punishment is jail (up to 7 year) and a fine. The Court of Appeal has made clear that it wants an immediate jail sentence rather than using the power to fine that is set out in the legislation. This is even if the amount involved is relatively small. In addition, for both civil and criminal cases, the proceeds of crime- often calculated so as to effectively bankrupt the person- are taken away. On top of this, clearly anyone that works in finance can not work again.

This typically follows years of investigation during which the persons life is ruined irrespective of the outcome of the investigation.

On the basis that the purpose of law is to protect society and stop people re-offending, rather than political point scoring, a more appropriate approach must be to increase the number of people that are caught insider dealing, to levy appropriate penalties and to do so quickly. The civil penalty is more than sufficient- a large fine and the inability to work in finance again and so no access to inside information to reoffend. The burden on proof is lower and so the speed of delivering a conclusion is faster.

By way of comparison, I understand that in the US it is not permitted for cases to go on for as long as typically happens in the US. We are all aware for reading the newspapers that in most of the cases, unless other peoples money has been stollen, in the US the penalty is a fine.

Moving towards the civil penalty would also take away some of the political goal scoring that is currently taking place regarding insider dealing. Instead the regulator would focus on increasing the number of convictions, thus creating a real deterance. The FSA can not seriously claim to have established or be establishing a credible deterance by using criminal prosecutions when the number of cases of insider dealing is, by its own statistics, not going down despite its actions over the years.

It is a well established theory that the best way to stop a crime is to increase the risk of getting caught rather than having a high penalty but low risk of being caught. Even when bought to court the record of securing a criminal conviction is somewhat patchy- it is not true that the FSA has only lost the most recent case that they have taken to court.

Finally, in an age where there is insuffient prison space, in a crime where no one has been injured it seems inappropriate that the state should pay to house the offenders in prison and the prison space not be available for other offenders where there are true victims.

Why is this idea important?

See above.

If proper effort is to be put in to stopping insider dealing, there needs to be more cases prosecuted, swifter prosections and a fair penalty. Instead, to grab headlines and progress careers, there are only a very small number of cases bought with investigations taking years to obtain sufficient evidence to start a criminal prosecution. This is put in the context of the FSA's statistics estimating that in about a third of all deals, insider dealing happens. This may well be true for all announcements released- making it potentially thousands of offences every day. So around five cases over two or three years…

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