Full Disclosure:​

Former analyst sentenced for insider trading​

By Jaysen Sutton​
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Hi Reader 👋🏽,

The Story:

Imagine we’re playing the game Articulate!. You have a card with a list of words. You must describe each word to your team without saying the word. If your team guesses more words on the card than mine, you win.

We start playing and you’re shocked at how good my descriptions are. Almost too good. My team wins.

You want to know my secret. I tell you that I was given access to the cards before we started playing.

You’d probably think this was unfair, right? I have access to information that wasn’t available to everyone else. Because of this advantage, I was able to play the game better. You decide on a rule to prevent anyone reading the cards ahead of time.

Welcome to the basic rationale of insider trading. Last week, a former Goldman Sachs analyst was jailed for insider trading and fraud. He traded shares using information he was able to access as a result of his role at the investment bank.

What you need to know for your interviews:

In the UK, the Criminal Justice Act 1993 deals with the criminal offence of insider dealing, while the Market Abuse Regulation deals with the civil offence. The laws are designed to stop individuals from trading based on private information they obtain, where this information would have a significant impact on the price, if it were made public. In the analyst’s case, the information he obtained related to potential M&A deals that Goldman Sachs advised on.

Impact on Law Firms:

Notably, the analyst's brother was a former Clifford Chance lawyer, who faced allegations that he used confidential information to trade in public stocks. The judge found there was no case to answer.

This is an important consideration for those of you who become lawyers. You’ll get access to private information about the companies you advise. For example, you might be aware a public company is confidentially managing a distressed situation. The firm you join will have policies on your ability to trade in stocks.

Have any thoughts? I'd love to hear your perspective below!

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