Insider trading and disclosure of inside information

Insider trading is the purchase or sale of a financial instrument by a person with access to insider information that may affect the valuation of the instrument in the market. It involves the use of inside information in making transactions in financial market instruments. Information in the case of this crime becomes its main tool – the reason for making a purchase or sale of the asset to which the information relates. Information is a commodity that affects the investment decision, and therefore the valuation of financial instruments.

The use and disclosure of insider information has for years been considered one of the most dangerous behaviors of the capital market, as it can distort the quotation of the entity to which it relates, sometimes also affecting the entire market or industry. Insider trading is an extremely harmful phenomenon, as it can affect large fluctuations in quotations, which in turn demonstrates the unpredictability of the market, and therefore its unattractiveness to larger, often foreign investors.

In Poland, insider trading abuses on the Warsaw Stock Exchange are so common that the exchange itself has earned the nickname “banana”. Calling the Warsaw Stock Exchange a banana exchange has to do with the fact that changes occurring on it are more often unpredictable than on foreign exchanges. The capital market, of which the financial market is a part, is supervised by the Polish Financial Supervision Authority. The purpose of supervision is to ensure the proper functioning of this market, stability, security and transparency, as well as to ensure the protection of the interests of participants from insider trading crimes.

The crime of so-called insider trading is defined by the Financial Instruments Trading Act, defining it in Article 181 of the Act as unauthorized use of inside information concerning financial instruments. The Polish law refers directly to the Regulation of the European Parliament and of the Council (EU) No. 596/2014 on market abuse (the so-called MAR Regulation) and provides for the use of insider information, a fine of up to PLN 5,000,000 (EUR 1,250,000) or imprisonment from 3 months to 5 years (or both penalties combined). The offense of disclosure of inside information is defined by Article 180 of the above Act, providing for a fine of up to PLN 2,000,000 (EUR 500,000)  or imprisonment for up to 4 years (or both penalties combined).

We offer the following services:

• analysis of the client’s needs – development of appropriate documents and procedures to reduce the risk of disclosure of confidential information in the organization;
• conducting audits aimed at identifying the cause of interest of criminal investigation authorities and implementing the optimal course of action, including planning a defense strategy in case of suspected crime (so-called criminal compliance);
• conducting training on preventing insider trading and disclosure of confidential information;
• advising on investigations by the Polish Financial Supervision Authority carried out under the Law on Financial Market Supervision;
• execution of defense against charges of insider trading and disclosure of confidential information; representation and assistance in crisis situations (searches, interrogations, arrests, presentation of charges, detention on remand).

Our offer is addressed to:

• entities of interest to the Polish Financial Supervision Authority;
• companies exposed to insider trading;
• companies seeking comprehensive support in the field of criminal compliance;
• individuals suspected and accused of insider trading or disclosure of confidential information;
• executives of commercial companies.