Christmas Bonus Season & Insider Dealing: Why Year-End Trading Draws FCA Scrutiny

Christmas Bonuses and Year-End Trading: Why Context Matters

Christmas bonuses and investment decisions often coincide towards the end of the year, particularly for people working in finance, professional services and listed companies.

There is nothing unlawful about investing your bonus. The concern arises if you have access to confidential information that could influence the price of shares or other investments.

For example, you may know about an upcoming company takeover, unpublished financial results or an important announcement through your work.

If that information has not been made public, it could affect whether you are legally permitted to trade.

The source of your money is not the deciding factor. What matters is the information you hold and how it relates to your trading activity.

Before investing, consider whether anything you know through your work could qualify as inside information. You should also check your employer’s personal trading rules and obtain approval where required.

If you are uncertain about your position, seek advice before placing the trade.

The Two Legal Regimes: Criminal and Civil Liability for Insider Dealing

Insider dealing is covered by two main legal frameworks in the UK.

The Criminal Justice Act 1993 creates criminal offences relating to insider dealing, while the UK Market Abuse Regulation (UK MAR) prohibits insider dealing and other forms of market abuse.

The rules overlap, but the legal requirements and possible consequences are not identical.

The criminal offence under the Criminal Justice Act 1993

The Criminal Justice Act 1993 creates the criminal insider dealing offence in England and Wales. The offence covers three distinct types of conduct. 

• The first is dealing in price-affected securities while holding inside information. 
• The second is encouraging another person to deal in price-affected securities while holding inside information, even if the person doing the encouraging does not trade themselves. 
• The third is disclosing inside information to another person outside the proper performance of one’s employment, office or profession.

Knowledge is a core element of the criminal offence. 

The person must know that they hold inside information and must know that the information came from an inside source. 

Prosecution may be brought by the FCA or the Crown Prosecution Service. 

The civil prohibition under UK MAR

UK MAR also prohibits using inside information to trade or attempt to trade, recommending or encouraging another person to trade on that information, and unlawfully sharing it. 

These rules are enforced by the FCA through its regulatory powers. 

The FCA can impose substantial financial penalties and take other enforcement action without securing a criminal conviction. 

The same trading activity may raise concerns under both the criminal law and UK MAR.

However, the legal tests differ, so whether a particular transaction amounts to insider dealing depends on the circumstances.

What Makes Information “Inside Information”?

Inside information generally refers to specific, non-public information about a company or financial instrument that could significantly affect its market price if it became public.

Under UK MAR, the information must be of a sufficiently precise nature that has not been made public, relates directly or indirectly to one or more issuers or financial instruments, and would, if made public, be likely to have a significant effect on price. 

A key consideration is whether a reasonable investor would be likely to use that information when making an investment decision.

Examples may include:

• An unannounced merger or company takeover.
• Financial results that are significantly better or worse than the market expects.
• A major regulatory decision that has not been publicly announced.
• Confidential information about a significant business transaction.

Not every piece of confidential information is inside information.

For example, ordinary internal discussions or information that would not be expected to affect a company’s share price may fall outside the legal definition.

The circumstances in which you received the information, its significance and whether it was available to the public all matter.

If you are unsure whether information you hold could be considered inside information, you should obtain advice before trading.

What Makes a Trade Potentially Unlawful

Dealing while holding inside information

Buying or selling shares while holding inside information may amount to insider dealing, depending on the applicable legal test and circumstances. 

The important question is what information you had when you decided to trade. 

For example, if you know through your work that a listed company is about to announce a significant acquisition, buying its shares before the announcement could raise serious concerns. 

The same applies if you sell shares after learning confidential information that could negatively affect their value. 

Receiving approval from your employer’s compliance team does not automatically make a trade lawful.

If you failed to disclose relevant information when requesting approval, the authorisation may not protect you from an insider dealing allegation. 

What “dealing” includes

Dealing is not limited to executing a trade. It includes acquiring or disposing of securities, entering into a contract to do so, and instructing or procuring another person to deal on your behalf. 

Attempting to deal can also engage liability under UK MAR even if the transaction is not ultimately completed.

Timing is therefore critical. The question is what information you held at the point the trade was placed or instructed. 

If inside information came into your possession before that moment, the trade may be caught by one or both legal regimes regardless of how the trade was subsequently processed.

Sharing Information and Encouraging Others to Trade

Insider dealing law extends beyond your own trading activity. 

Under the Criminal Justice Act 1993, it is a criminal offence to encourage another person to deal in price-affected securities while you hold inside information, even if you do not trade yourself and even if the other person does not know why you are encouraging them. 

Under UK MAR, recommending or inducing another person to deal based on inside information is prohibited, as is unlawfully disclosing inside information to any person outside the normal exercise of your employment, profession or duties.

Informal conversations, messages, hints and tips can all fall within these prohibitions depending on the circumstances. 

The question is not whether the conversation was casual or social. It is whether inside information was disclosed and whether the disclosure took place outside the proper exercise of your professional role. 

You should be careful about discussing non-public company information outside your work, particularly with people who may be able to trade on it.

Workplace Dealing Policies and Legal Requirements

Many financial services firms have policies governing employees’ personal investments. These policies are intended to reduce conflicts of interest, protect confidential information and prevent market abuse.

Depending on your role, your employer may require you to obtain approval before trading in particular shares or other investments.

Some employees may also be subject to restrictions on dealing during certain periods or in securities included on the firm’s restricted list.

Listed companies have additional obligations relating to insider lists and restrictions affecting directors and certain senior employees. People closely associated with those individuals may also be subject to particular reporting requirements.

Following your employer’s trading rules

Your employer’s policy may require you to:

• Request approval before placing certain trades.
• Declare relevant personal investment accounts.
• Avoid trading in companies on a restricted list.
• Follow applicable closed-period restrictions.
• Report transactions after they have taken place.

The requirements vary between firms and roles.

A breach of your employer’s policy can lead to disciplinary or regulatory consequences, but it does not automatically mean that you have committed a criminal offence.

Equally, following the policy does not guarantee that your trading activity complies with insider dealing law.

If you hold inside information, approval from your employer will not necessarily protect you from liability.

Before trading, check the rules that apply to you and make sure any information provided to compliance is accurate and complete.

How Trading Patterns and Communications May Be Examined in an Insider Dealing Investigation

The FCA uses transaction monitoring, suspicious transaction and order reports submitted by regulated firms, and its own market surveillance capabilities to identify trading patterns that may warrant further investigation. 

Regulated firms are legally required to report suspicious transactions and orders to the FCA. Those reports are submitted confidentially and the person who traded may not be aware that a report has been made.

What investigators may examine

Investigators may look at when a trade occurred, how much money was invested and whether the transaction differed from a person’s usual trading activity. 

Communications are also examined. This can include emails, messages, call records and meeting records on work devices and, where lawfully authorised, personal devices. 

Investigators may look at the timing of communications, the language used and patterns of contact between individuals who traded and individuals who had access to inside information. 

The content of a conversation matters, but so do the timing and the relationship between the people involved.

An individual does not need to be under formal investigation for compliance staff to request information about trades or communications. 

Internal reviews are common and do not automatically mean that a matter will escalate to a regulatory or criminal insider dealing investigation.

What to Do if Compliance Staff or the FCA Contact You

If your firm’s compliance team contacts you

If your employer asks questions about your trading activity, establish what information is being requested.

It may be a routine compliance check, a request for clarification about a particular trade or part of a wider investigation.

Do not delete, alter or hide any records, including emails, messages or trading confirmations.

Document destruction can itself give rise to serious legal consequences, including potential criminal liability. Preserve everything in its current state.

You are entitled to understand what the compliance team is asking and why.

You are also entitled to seek independent legal advice before responding, particularly if the request goes beyond routine pre-clearance queries. Obtain that advice promptly if you have any concern about your position.

Do not agree a coordinated explanation with colleagues or other individuals who may be connected to the same review. 

Each person’s account should reflect their own honest recollection. Coordinating explanations can create additional legal risks that go beyond the original inquiry.

If the FCA contacts you directly about insider dealing

If you receive direct contact from the FCA, obtain independent legal advice before responding. The nature of the contact will affect your rights and obligations, and the distinction between voluntary and compelled engagement matters legally.

A solicitor can explain how those protections work in your specific situation before you attend.

At a voluntary interview, you have the right to decline to attend or to leave. You also have the right to have a solicitor present. Taking legal advice before deciding whether to participate in a voluntary interview is strongly recommended.

In either case: preserve all records, do not discuss the matter with colleagues without legal advice, and engage a solicitor experienced in FCA investigations as early as possible.

Penalties and Consequences for Insider Dealing

Insider dealing can result in criminal prosecution, FCA enforcement action and serious employment consequences.

The outcome depends on the conduct involved, the evidence available and whether the matter is pursued under criminal law or financial regulations.

Criminal penalties under the Criminal Justice Act 1993

On conviction on indictment in the Crown Court, the maximum penalty is seven years’ imprisonment and an unlimited fine. On summary conviction in the Magistrates’ Court, the maximum penalty is six months’ imprisonment and a fine. 

The sentence in any individual insider dealing case will depend on the specific facts, the defendant’s role, the value of any benefit obtained and other relevant factors.

Civil and regulatory sanctions under UK MAR

For civil breaches of UK MAR involving insider dealing, the FCA can impose an unlimited financial penalty. There is no statutory cap on the amount. 

The FCA can also issue a public censure, seek injunctions to restrain ongoing conduct, and apply to court for restitution orders requiring a person to pay back profits made or losses avoided. 

The FCA can withdraw a person’s approval to carry out regulated activities or prohibit them from doing so in the future. 

These civil sanctions do not require a criminal conviction and can follow from an FCA investigation that does not result in prosecution.

Employment and professional consequences

Even where no criminal charges are brought and no FCA enforcement action follows, an employee found to have breached a firm’s dealing policy or to have been connected to an insider dealing investigation may face dismissal. 

A finding of this kind can also result in a regulatory reference that follows a person into future roles in financial services. 

Professional bodies in law, accountancy and other regulated fields may take their own disciplinary action where their members are involved. 

The employment and professional consequences of an insider dealing investigation can be severe and long-lasting, even where the legal outcome is inconclusive.

How an Insider Dealing Solicitor Can Help

If you are concerned that a proposed trade could involve inside information, a solicitor experienced in financial crime and market abuse can assess the circumstances before you proceed.

They can explain whether the information may fall within the legal definition of inside information and what risks the proposed transaction could create.

If your employer has already contacted you, a solicitor can advise on the nature of the enquiry and your obligations when responding.

Where the FCA is investigating, your solicitor can review requests for information, explain the difference between voluntary and compulsory questioning and represent you during interviews.

They can also assess the evidence, advise on the allegations and help you respond appropriately throughout the investigation.

Early advice is important because decisions made during an internal review or regulatory enquiry may affect your position if proceedings follow.

If you are facing allegations of insider dealing or are concerned about trading while holding confidential information, speak to our financial crime team for advice about your circumstances.

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