Insider traders ‘can escape sanction’

INSIDER traders who invest in shares via spread betting operations can escape all possible legal sanction from the Irish Stock Exchange, it emerged last night.

ISE chief executive Tom Healy said company insiders who exploit confidential information to make profits by betting on the fluctuations of the company’s share price are not acting illegally.

“There’s nothing we can do about it. There’s nothing we can do if they do not trade in the shares,” he conceded last night.

Mr Healy said they are aware of the lacuna in the law which empowers them to prosecute an investor using inside information to profit by buying or selling shares in a company but does not enable them to take action against an investor who bets with a bookmaker on the fate on a share.

Dublin-based Share Spread, the financial spread trading division of Sports Spread, thwarted a betting coup which could have cost the company hundreds of thousands of euro.

The company refused to take bets of up to €1,000 from investors who sought to open betting accounts in the days prior to the announcement that Gresham was in takeover talks.

Gresham shares rose by 15 cents and this could have exposed the company to a loss of €150,000 on a single €10,000 bet. Share Spread spokesman Tony Judge said the company, with an annual turnover of €70 million, has asked to be regulated by the Irish Financial Services regulatory authority but has be rebuffed.

Mr Judge said individuals who open accounts with them are not subject to the same money laundering legislation requirements individuals opening accounts with banks or other financial institutions have to meet.

“It was quite clear that certain individuals had information ahead of the Gresham announcement. We don’t quote prices €10,000 per euro-cent movement in any share, and certainly not in something like Gresham Hotels.

“Had they tried to place a trade for anything up to a couple of hundred euro per point, we would probably have accepted it but this was naïve in the extreme,” he said.

Mr Judge said if the individuals who sought to place bets on Gresham had succeeded, their gambling profits would also have escaped capital gains tax, stamp duty and commission that trading on the stock exchange would have exposed them to.

Mr Judge said that if required by the Stock Exchange, Share Spread will supply any information it has to the regulator.