Financial Conduct Authority (FCA) UK Regulation Sample Exam

Which of the following is exposed to the offence of insider dealing under the Criminal Justice Act 1993?

1. A regulatory officer reviewing company documents

2. The audit partner who sells the company's shares after reviewing the audit file prior to signing the annual accounts

3. A financial analyst providing forecasts

4. A shared room employee trading on social media tips

The correct answer is: The audit partner who sells the company's shares after reviewing the audit file prior to signing the annual accounts

The correct answer involves the audit partner who sells the company's shares after reviewing the audit file prior to signing the annual accounts. This scenario exemplifies insider dealing because the audit partner is privy to non-public information that could influence the company's share price. The Criminal Justice Act 1993 defines insider dealing as carrying out transactions based on information that is not publicly available and which, if it were known, would likely affect the share price of the company. In this case, the audit partner has access to sensitive and internally available information that outlines the company's financial status before it becomes public knowledge through the signing of the annual accounts. By selling shares based on this non-public information, the audit partner not only violates ethical standards but also infringes upon the law concerning insider trading. The other situations do not meet the threshold for insider dealing as defined by the Act. For instance, a regulatory officer reviewing company documents may have access to various filings and information, but this role typically does not grant them the same level of improperly actionable insights related to imminent price changes as the audit partner would have in their capacity. The financial analyst providing forecasts operates based on publicly available data and potentially widely known analysis rather than undisclosed internal information. Similarly, the shared room employee trading on social media