Declan Service, an Irish businessman, has been charged with two counts of insider trading relating to him possessing information allegedly used in acquiring and disposing of financial instruments to which that information relates.
The alleged offences occurred in May 2020 involving suspicious transactions in Open Orphan plc — now called hVIVO plc — a pharmaceutical company quoted on the AIM stock market in London.
Service pleaded guilty in the Dublin Circuit Criminal Court to one charge of possessing information, however, he pleaded ‘not guilty’ for another “near identical” charge relating to insider trading.
He faces a fine of up to €10,000,000, a prison sentence of up to 10 years, or a combination of both — his sentencing date has been scheduled for 20 December.
This is a clear demonstration of the Irish authorities clamping down on insider trading. Last year, a panel of assessors set up by the Central Bank panel found that prominent Irish businessman, Philip Lynch, had contravened the EU Market Abuse Regulation by using inside information to acquire 200,000 shares in C&C Group plc.
The panel recommended that Mr Lynch, be fined €75,000, be publicly cautioned and disqualified from being involved in a regulated financial services company for five years.
In July 2023, the Central Bank issued an insider trading warning to Irish trading venues off the back of an inspection in 2022 which found widespread failures to monitor and detect abusive behaviours.
According to the Central Bank, trading volumes have doubled in Ireland since 2019 as traders moved transaction activity away from London following Brexit. The findings show, with some alarm, that reports of suspicious transactions have not kept pace with the increased activity as expected, indicating that firms are simply missing them due to sub-standard internal processes and controls.
The reputational damage, sanctions and penalties are as a direct result from failing to comply with the appropriate monitoring and reporting; however, there are many effective technology solutions available to help issuers and firms to monitor and control market abuse. For example, staff training was highlighted in the Central Bank’s schematic review in 2020 as one of the key challenges faced by companies. Educating staff of their obligations and responsibilities can help organisations mitigate the risk of potential sanctions resulting from insider trading.
The Irish authorities are sending a clear message to the market with these recent fines and sanctions. Compliance with the Market Abuse Regulation can be a challenge, although non-compliance carries heavy penalties and risks for organisations and individuals. At Cytec, we see software playing a key role in monitoring, detecting and preventing abusive market transactions.