Fidelity Bank Plc has announced that its Executives Directors, other employees, their family members and persons related to the employees and the lender have been barred from trading in the company’s shares.
The restriction on the bank’s staff and related persons was carried out in accordance with Fidelity Bank’s Insider Trading Policy. The development was conveyed through a statement published on the Nigerian Stock Exchange (NSE).
More Details: The Insider Trading Policy of Fidelity Bank prohibits the aforementioned categories of persons from dealing in the lender’s shares at certain times. And one of such periods includes when the company is working on its financial accounts.
The period leading to the release of the company’s finances is often called Blackout periods; when employees, Directors, and members of the Shareholders Audit Committee are prohibited from the bank’s securities.
The company announced that “all Insiders and their Connected Persons are prohibited from trading (i.e buying, selling, transferring or otherwise dealing) in the Bank’s shares from July 26, 2019 until its audited Half Year 2019 financial accounts are released on the floor of the Nigerian Stock Exchange.”
NSE’s listing rules back the Insider Trading Policy of Fidelity Bank which became a quoted company on the NSE in 2005. The trading policy is implemented to ensure the following;
- Promote compliance with the provisions of the Investments and Securities Act (ISA) 2007, the Securities and Exchange Commission Code of Corporate Governance, and the Listing Rules of the Nigerian Stock Exchange.
- Ensure that all persons to whom the policy applies (affected persons), who possess material non-public information do not engage in insider trading or tipping.
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What you need to know: Though insider trading is widely known as illegal, it is also legal to some extent as long as the Corporate Insiders do not break the trading rules which includes trading on non-public company information or passing such secret material to a family member, in-laws or related persons to trade on the knowledge of such information.
A legal insider trading mandates the Corporate Insider to inform the regulatory body (i.e., the Securities and Exchange Commission, SEC) about their trades. Otherwise, tradings are only allowed on the information made public by the private company or government.
This is because once an individual accepts a company’s employment offer, he or she has pledged to put the interest of the company’s shareholders above theirs. Therefore, trading based on private company information is tantamount to breaching the employee contract.
Criminal and civil penalties: Any Corporate Insider or related persons found guilty of such activities will face the following ISA criminal and civil penalties;
- Criminal: Contravention could attract a fine ranging from N500, 000 or imprisonment for a maximum term of seven (7) years for individuals, whilst contraventions by corporate entities could result in the imposition of a minimum fine of N1, 000,000.00 or a sum equivalent to double the amount of any profit derived from or any loss averted by the use of such information. SEC can and has recently sought the expulsion of the maximum profits gained by alleged offenders.
- Civil: Civil liability could also include the payment of compensation to any aggrieved person for any applicable losses suffered due to a contravention of the ISA provisions relating to insider trading.
Plot twist: The only individual that trades with non-public information of a company and not get penalised or imprisoned for it is a third party that overheard some company staff discussing a private information. Such an individual must not be related to them in any way.