FCA confiscation order demonstrates that insider dealing doesn’t pay

Last year the Financial Conduct Authority (FCA) secured a successful conviction against Mr Mohammed Zina for six insider dealing offences that took place between 2014 and 2017. Although the profit from the insider dealing totalled just over £140,000, the confiscation order is for nearly £600,000, thus confiscating the entirety of Mr Zina’s assets.

The order must be paid within three months, or Mr Zina will face an additional five years in prison on top of the original 22 month sentence. The reason the confiscation order is significantly larger than the trading profits is because the court found Mr Zina ultimately benefited across a number of offences, including fraud.

Although examples of compelling restitution from firms, issuers and individuals were first heard of in Hong Kong, the FCA has increasingly been keen to use these powers.

In 2017, Tesco agreed to pay redress to 10,000 investors after giving a false and misleading trading update, which was the first redress order under s384 of FSMA 2000. In addition, in 2020 Redcentric Plc agreed to provide compensation to all net purchasers of shares between Nov 2015 and Nov 2016, having misstated accounting balances.

Long gone are the days when insider dealing was seen as a ‘victimless crime.’ The focus now is not only on securing convictions, but also on ensuring that those benefitting from insider dealing are forced to compensate innocent investors that were on the other side of the orderbook.

These are very healthy developments in the ongoing drive to uphold market integrity, maintain confidence in the markets and send a clear message that insider trading or fraud in financial markets won’t be tolerated by the UK regulator.

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