Insider Trading Case Against Former GlobalCapital Director Rejected on Appeal

A former director of Maltese financial firm GlobalCapital has lost an appeal against a regulator’s decision to fine him for insider trading in 2007.

Background

James Black, who was at the time a director of GlobalCapital, had been accused by the Malta Financial Services Authority (MFSA) of using inside information to trade shares in the company. The alleged insider trading took place in December 2007, when Black sold his shares.

Arguments and Findings

Black argued that the financial situation of GlobalCapital, which has since rebranded as Lifestar Holding under new ownership, was publicly known at the time he sold his shares. However, the Financial Services Tribunal (FST) disagreed and found him guilty of insider trading.

The FST’s ruling stated that Black had access to information about GlobalCapital’s financial situation during a meeting with the company’s board of directors, where he learned that the firm had suffered a €1.8 million loss. This information was not publicly available at the time and was considered “inside information” by regulators.

Black argued that information about the company’s financial troubles was already publicly available through previous notices published by GlobalCapital. However, the FST determined that this information could not be interpreted as equivalent to the inside information he received at the board meeting.

Reasoning Behind the Decision

The FST also rejected Black’s argument that his sale of shares was part of a wider exercise to raise funds for a property purchase. Instead, the tribunal found that he had chosen to sell only a few days after the board meeting and suspected that he knew he would benefit from good prices before the publication of GlobalCapital’s consolidated audited accounts.

Outcome

Black’s appeal against the FST’s decision was denied by the Court of Appeal in November. The case highlights the importance of ensuring that financial market participants do not use inside information to trade on shares, and underscores the need for regulators to take a tough stance against insider trading.

Conclusion

The outcome of this case serves as a reminder of the serious consequences of engaging in insider trading and the importance of transparency in financial markets. Regulators must remain vigilant in detecting and prosecuting such offenses to maintain public trust and confidence in the financial system.