McQuoid, R. v

Deliberate insider dealing is a serious species of fraud, rather than a merely regulatory contravention. It betrays confidence entrusted to market participants and damages public confidence in market integrity. Deterrence may require an immediate custodial sentence, particularly where a trusted insider deliberately makes a substantial profit.

A sentence is not mitigated because other offenders may previously have been dealt with by a regulator. That is so unless the defendant was misled into believing that the conduct was not criminal or had a reasonable expectation of avoiding prosecution. Sentencing remains fact-sensitive and should address the offender’s role, misuse of confidential information, culpability, planning, benefit, victim impact and market confidence.

The appellant, a solicitor and former General Counsel of TTP Communications Plc, was convicted at Southwark Crown Court of one count of insider dealing. He passed confidential information about a proposed takeover to his father-in-law and procured the acquisition of 153,824 shares. The transaction produced a profit of £48,919.20.

He received eight months’ imprisonment. His father-in-law, convicted on the same count, received the same term suspended for 12 months with a residence requirement. The appellant appealed against sentence, contending principally that prosecution was unfair or that sentence should reflect the Financial Services Authority’s former regulatory approach, and relying on the difference between the two sentences.

Appeal dismissed. The court held that the eight-month sentence was not excessive and was as merciful as it could properly be.

1. Insider dealing is not victimless or merely regulatory misconduct. A person who deliberately exploits confidential takeover information betrays trust, cheats those trading without that information, and undermines confidence in the market. It is a serious form of fraud for which deterrence is important. The court respectfully adopted the observations in R v Spearman [2003] EWCA Crim 2893.

2. The availability, or former use, of regulatory proceedings did not make this prosecution or sentence unfair. Earlier offenders may have been fortunate, but that could not benefit the appellant. He had not been misled into believing insider dealing was anything other than criminal, nor had he acquired a reasonable expectation of avoiding prosecution.

3. For future sentencing, relevant matters include the offender’s trusted role, acquisition and misuse of confidential information, deliberate or reckless conduct, planning and sophistication, joint participation and relative culpability, intended and actual benefit, proved victim impact, and damage to public confidence. Age, a guilty plea and good character remain relevant, although good character may itself explain why the offender was entrusted with the information. The court also indicated that R v Clark [1998] 2 Cr App R(S) 157, allowing for inflation, and the cited theft-in-breach-of-trust guideline could assist sentencers.

4. The appellant’s professional and family consequences, confiscation of his profit, and prosecution costs had been properly weighed. The co-defendant’s suspended sentence reflected personal circumstances specific to him and created no improper disparity.

• Court of Appeal (Criminal Division) — Leave to appeal against sentence was granted and the appeal was dismissed: [2009] EWCA Crim 1301.
• Southwark Crown Court — The appellant was convicted by a jury of insider dealing on 27 March 2009 and sentenced to eight months’ imprisonment on 30 March 2009.