The regulation of insider dealing with particular reference to Maltese law

Abstract

It is only since 1990 that Malta has its own Stock Exchange. Following the setting up of the Malta Stock Exchange, in 1994, the legislator passed a package of financial services legislation intended to attract investment into Malta by providing for a sound securities market which is adequately protected in relation to its investors. One such protection afforded through legal provisions to the securities investors on the Malta Stock Exchange is that against insider dealing. This thesis aims at examining the legal provisions prohibiting insider dealing. Prior to analysing the law regulating Insider Dealing that is, the Insider Dealing Act, Act._XXI of 1994, Chapter 1 as an introduction, will seek to establish and define what is Insider Dealing, the reasons why insider dealing should be regulated by law, and will also seek to establish the background to this Maltese anti-Insider Dealing law. This study will then, in Chapter 2, continue by analysing the offence of insider dealing, clearly outlining who are insiders and tippees, the classes of insiders and the species of primary insiders found under Maltese law. Another important element of the offence of insider dealing will be discussed in Chapter 3, this being inside information. Here an attempt will be made at examining the elements which constitute unpublished price sensitive information, as inside information is referred to under Maltese law. At the end of this chapter, the study includes a review of what kind of securities fall under the insider dealing prohibitions aimed to provide investor protection. Chapter 4 will seek to analyse the types of prohibited acts which are deemed to constitute insider dealing. Furthermore, the Chapter will outline the exceptions existing under Maltese law where, in certain circumstances, though the elements of the offence of insider dealing exist, the law does not allow liability to arise provided that certain facts are proved. Directors' duties and responsibilities in the light of the Insider Dealing Act will be the topic discussed in Chapter 5. As primary insiders par excellence, directors are faced with a number of duties and responsibilities which, if not honoured may lead them to commit the offence of insider dealing. The chapter will then progress by reviewing what means may be used in order for directors to be able to perform their duties without committing the offence of insider dealing. Here reference shall be made to Chinese walls and self regulation as well as the regulation brought about by the Malta Stock Exchange bye-laws. Finally, the liability and punishment which exist with respect to the offence of insider dealing shall be discussed and a distinction will be sought to be drawn between criminal liability and the civil remedies also available for the aggrieved investor. The role played by regulatory and enforcement officers shall be examined in Chapter 6 which addresses the supervision and investigation of the offence of insider dealing: Here reference will be made to the investigative machinery provided under the Malta Stock Exchange Act, Act XXXIII of 1990. This chapter will then be followed by any concluding points which may arise from the study, outlining suggestions and recommendations which may better provide investor protection in order to combat insider dealing.