Financial Times

Insider dealing: SEC mulls changes in rules
The Securities and Exchange Commission (SEC) is considering amending the rules governing the crime of insider dealing to make it easier to nail offenders because of difficulties in proving offences under the current law.

“The SEC finds it very difficult to prove insider dealing in most cases,” Nihara Mallawa of the SEC’s Legal and Enforcement Division told a seminar on the rights of minority shareholders organized by the Institute of Chartered Secretaries and Administrators (ICSA).

“We only have criminal sanctions. We are thinking of amending the law.”
Part of the shareholder protection under the SEC Act is covered under the offence of insider dealing which bars trading in shares while being privy to undisclosed price sensitive information by virtue of being connected to a company, such as prior knowledge of dividend payouts.

“We’ve had to drop a lot of cases because the offence is so difficult to prove,” Mallawa said. She told The Sunday Times FT that the SEC is thinking of introducing civil sanction where offenders can be taken to the district courts and also be asked for compensation.

“This is easier and a lesser burden of proof is required,” Mallawa said. “Criminal sanction requires a higher burden of proof.”

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