First person convicted of insider trading in history of State fined €69k

Declan Service, of Sunnyvale Avenue, Portrush, Co Antrim, has been told he faces a potential term of imprisonment of 18 months when his sentence is finalised next February. Picture: Paddy Cummins

The first person to be convicted of insider trading in the history of the State has been fined £60,000 (€69,000) at Dublin Circuit Criminal Court.

Declan Service, of Sunnyvale Avenue, Portrush, Co Antrim, has been told he faces a potential term of imprisonment of 18 months when his sentence is finalised next February.

The 63-year-old carer pleaded guilty to engaging in insider dealing on dates between May 18 and 22, 2020, when he used sensitive market information to sell shares before that information was made public.

The court heard Service, who is suffering from bowel cancer, prostate cancer and long-term depressive illnesses, effectively gambled his retirement fund by using inside knowledge to offload his shares in a pharmaceutical company days before buying them again at a discounted rate.

At a hearing on Wednesday, the court heard Service made a profit of roughly £11,500, which would have increased to £44,000 if he retained his shares for one year.

The alarm was raised when Goodbody Stockbrokers alerted the Central Bank to suspicious transactions made by Service, who was one of its clients.

Detective Garda John Farrelly of the Garda National Economic Crime Bureau told Fionnuala O’Sullivan BL, prosecuting, the activity concerned shares in Open Orphan, an Irish pharmaceutical company listed on the London Stock Exchange.

The court heard in May 2020, Open Orphan decided to sell additional shares on the market at a discounted rate in order to raise €12m in capital and fund growth.

Before placing these shares on the market, the company invited its shareholders to a Zoom presentation on Monday, May 18, 2020, to brief them of its plans.

Market-sensitive

Open Orphan told all participants the presentation was market-sensitive and shareholders were prohibited from trading shares until the information was publicly available on Friday May 22, 2020.

The court heard shareholders in receipt of this confidential information were deemed “insiders” and were prohibited from sharing the information, in order to prevent them exploiting it for financial gain and to protect the integrity of the market.

Service, who at the time held 3.89 million shares in Open Orphan valued at £566,000, agreed to being made an “insider” and attended the Zoom meeting where the fundraising round was confirmed.

The court heard the following day, Service contacted his broker at Goodbody, instructing them to sell his full shareholding over the coming days.

Prosecuting gardaí obtained recorded phone calls of Service saying to his broker on May 19: “There’s going to be something on Friday that might lower the price a bit. I’d put next year’s holiday money in it, if I were you.” 

On May 20, Service again phoned his broker, saying he had been speaking to the CEO of Open Orphan and that they were “going to raise monies soon, if you know what I mean”.

Suspected market abuse

The broker suspected market abuse and followed procedure by raising his concerns with a compliance manager, without alerting Service.

Service then sold all his shares and instructed another broker at Goodbody to buy £566,000 worth of shares at the discounted rate when they were made available to the public on Friday.

However, because too many people tried to buy the shares, the accused was only able to buy £50,000 worth of shares at the discounted price.

At the end of the trading day on Friday, Service had increased his share number by over 92,700, which the Central Bank calculated as equivalent to making a profit of £11,500.

The Central Bank forwarded its report to the Garda National Economic Crime Bureau in August 2021, and in September 2022, Service was arrested by appointment and interviewed twice by gardaí.

Det Garda Farrelly said Service was fully cooperative and made full admissions, accepting everything that was put to him.

He told gardaí: “I truthfully didn’t realise I had done anything wrong. I acted innocently in my mind. It’s not in my DNA to do something I know to be illegal.” 

Service apologised and said he “obviously regretted this serious lack of judgement”.

The prosecuting garda agreed with Brian Gageby BL, defending, that Service’s guilty plea was of benefit to the prosecution as such cases can otherwise be “tedious and tortuous” and “document-heavy”.

Det Gda Farrelly also agreed that Service had not come to garda attention since this offence and did not have “trappings of wealth”.

Mr Gageby said Goodbody was a reputable stockbroking firm and there was an “inevitability” that this offence would be reported up the compliance chain.

Counsel described the offence as “unsophisticated” and said Service had “gambled his retirement”.

Service has no previous convictions and has three adult children and a long-term partner, the court heard.

Service now works as a carer for adults with learning disabilities, earning £350 a week.

Mental health difficulties

Mr Gageby said Service has suffered significant mental health difficulties himself since his 20s and has been treated with anti-depressants and anti-psychotic medications.

He said Service’s mental health difficulties suggest he had a “degree of disinhibition” at the time and showed poor decision-making.

“When one hears the evidence, one might take the view that he was some class of high-rolling, stock-dealing person who was trying to take the market to his own advantage, but this does not reflect the life he’s lived,” said Mr Gageby.

Judge Elma Sheahan said the aggravating factor was the seriousness of the offending and the mitigating factors included the value of his guilty plea, his full cooperation and his previous good character.

She also took into account that he has been a productive member of society and has contributed as a volunteer, and has suffered mental health difficulties which provide a context for his offending.

Judge Sheahan said notwithstanding the submissions made by the defence, Service had engaged in insider trading when it had been made clear to him that he could not trade.

“He chose to ignore this and to proceed to make a benefit,” said the judge, describing the offending as “in the lower range”.

She set a headline sentence of two and a half years but said with mitigation, 18 months would be an appropriate sentence but that she would review this and adjourned finalisation until next February 19.

In the meantime, Judge Sheahan ordered Service to pay a fine of the euro equivalent of £60,000 to be lodged to his solicitor’s account.