This refers to the purchase or sale of company shares by insiders when in possession of insider information which if generally known would affect the price of those shares (section 72 of the Securities Services Act).
Insider means- the person who has inside information through any of the following-:
Being a director, employee or shareholder of an issuer of securities listed on a regulated market to which the inside information relates Having access to such information by virtue of employment, office or profession or Where such person knows that the direct or indirect source of the information was a person contemplated above.
Insiders may be any of the following-:
o Directors of the company (both executive and non-executive o Employees of the company
o Shareholders of the company
o Professional people, and advisors (such as management, consultants, bankers, auditors or legal advisors) who provide services to the company or associated with the company and also
o A person who receives information inside knowing it is sourced from any of the above people
The core of the insider-trading concept is the fiduciary relationship between the insider and the company; it has also been argued that the company could be an insider when it pre-purchases its own shares Insider information
This means specific or precise information that has not been made public and which
– Is obtained or learned as an insider, and
If it were made public would be likely to have a material effect on the price or value of any security listed on a regulated market...
Offences and Penalties under Securities Services Act -
There are four insider trading offences, it is an offence under the SSA to do any of the following-:
1) Dealing in securities for one’s own account while in possession of inside information
2) Dealing in security on behalf of another person while in possession of inside information
3) Disclose inside information to another person and
4) Encourage or discourage another person from dealing with securities knowing that tis is done based on insider information
The penalty for committing the offence of insider trading in terms of the SSA is MAXIMUM fine of R50Million and /or Imprisonment up to a period of 10 years
Nb* in insider trading is prohibited in many jurisdictions as a form of market abuse that is unfair to other market participants.