Never use inside information for insider trading – it’s a serious crime
What it's all about
Around the world stock markets enable us to buy and sell shares in different companies. The value of these shares goes up and down. If you buy at a lower price and the share value goes up, you make a profit.
You can also speculate on what value a particular share will be in the future and make money that way.
So long as everyone involved in trading has the same information, then the market is fair.
That’s why virtually every country regulates its capital markets, and a key way they do that is to set out rules that make sure everyone has equal access to information about the shares that are being traded.
But if someone who works for a company and knows something that could affect its share price and tries to get an undue advantage from using that insider information to make money by buying or selling company shares, or letting someone else know who wants to do the same thing, that destroys the integrity of the market.
This is called ‘insider trading’ or sometimes ‘insider dealing’. It’s unfair, it’s illegal, and there are extremely serious consequences for anyone - and any company - involved in it.
We’re listed on the London Stock Exchange and regulated by the United Kingdom Financial Conduct Authority (FCA). We must strictly follow their regulations.
That’s why we have very strict rules to make sure no one at Serco deliberately sets out to exploit any inside information they have or discloses it accidently before it has been publicly released.
“It’s like confidential information – you keep it safe, never use it for your own gain, and never pass it on.”
What we all need to know and do
As part of our job, we may learn non-public information about Serco or its related companies. In that case, we cannot and must not use it for personal or financial benefit - for example to buy or sell shares – and we must not share it with others.
While holding inside information, we must not:
Trade in Serco shares by purchasing or selling them directly or indirectly.
Recommend, advise encourage or ‘tip off’ anyone to trade in our shares.
Disclose the information we have to another person. This includes any inside information we may have about Serco or other companies related to Serco.
We must always strictly follow the Company’s Share Dealing Code.
If we become aware of any incidents or potential incidents of Insider Dealing, we report these at once to the Company Secretariat.
If we’ve disclosed inside information by accident, we tell our manager at once to create the best chance of limiting any damage that may be caused.
If we believe that there is a legitimate business reason to disclose inside information in the normal course of our employment, or we are simply unsure, we always consult with the Company Secretariat.
If you regularly or periodically possess inside information or have it because of a project you are working on, then you are a ‘Restricted Person’. The Company Secretary will tell you this in writing and you will be put on the Employee Insider List. Restricted Persons cannot deal in company shares without written approval, and as with all inside information they must not disclose the information they hold to anyone else.
We were all partying! We’d just had the news about a huge deal. The company were preparing to announce it but of course we all knew – we’d been one of the big reasons for the win!
There was an atmosphere of real celebration and pride. We felt Serco so deserved this and it was a recognition of what we stood for.
Around about midnight there were just seven of us left and we got into this conversation. It started off being about how you demonstrate pride and loyalty.
Then Misha said, ‘You know I think what I’m going to do is buy some shares in Serco. Invest in what I believe in!’
And that’s how we all ended up gathered around Misha’s laptop looking at the markets and Serco’s share price.
Someone said, ‘I bet Serco’s price will go up once they hear the news of the deal.’
Someone else said, ‘You know if we really believe this deal is going to make a difference, we could all invest in something we’ve been a part of – and make a profit too.’
And someone else said, ‘No, I don’t think you can do that. I mean, we know stuff that the market doesn’t know yet.’
Then there was a discussion about how that wasn’t true – we couldn’t be sure what impact the deal would have. It might increase the share price, or decrease it.
I guess you can tell from all this that we didn’t really have much idea what we were doing.
Anyway, crazy as it sounds now, we decided we’d all club together – like a syndicate doing the lottery. That’s really what we thought we were doing.
We decided we’d each put $1,000 in. If we ended up winners, we’d go out for an expensive meal. If we lost, we’d go out for a pizza.
So that’s what we did.
That was six months ago. All seven of us have lost our jobs for Insider Trading. We tried to explain that no one meant any harm and we didn’t know the rules. But I can see that that’s no excuse and Serco didn’t have any option – if they hadn’t taken the action they did, then they would have been seen to condone a really serious crime.
At least we didn’t end up in prison. But that outing to the pizza restaurant isn’t going to happen any time soon.
As part of our job, we may learn non-public information about Serco or its related companies. In that case, we cannot and must not use it for personal or financial benefit – for example to buy or sell shares – and we must not share it with others.
I was in the middle of a virtual meeting when it happened. I was talking to my counterpart at one of our partners about how we could improve our service in the coming year.
Then he turned away. I could see that someone off-camera was talking to him. He came back to me and said, ‘Can I just take this very quickly?’
When he came back, he was beaming. He said, ‘Sorry about that. It was some very good news and I just had to take it.’
He told me that the company had just learned it had been awarded a very large project. Then he gave me just an idea of how large, although he didn’t go into any details.
I congratulated him and he said, ‘I probably shouldn’t have told you that. But I suspect we’ll be calling you in to help us. Anyway, back to what we were talking about …’
When I got back, I told a few people. One of them said, ‘You should buy some shares.’
I said I didn’t think that would be legal, but he said ‘Of course it is. You don’t know any details, and anyway it’s a project we’ve nothing to do with. You’d just be acting on a hunch.’
I thought about it - and decided not to. Then a couple of days later, our partner announced the news and sure enough their share price went up significantly. I wished I’d thought otherwise.
I forgot about it for several weeks. Until I was in another meeting with one of our lawyers. My colleague who had insisted it would be okay to buy shares was also there.
I was curious to know which one of us had been right. So I told the lawyer the story. Straight away he said, ‘Then it’s a good thing you didn’t. You would have been guilty of insider trading if you had. And if you’d told someone and they’d acted on your tip-off it would have been the same. And if anyone had found out, I wouldn’t be speaking to you now as you would have lost your job here. You might even be doing a prison sentence.’
I looked over to my colleague – and he looked back at me like we were accomplices in a crime. And his face turned a deep shade of red.
I don’t know if he acted on what I told him, as he has never spoken about the incident again.
Nor have I.
While holding inside information, we must not disclose the information we have to another person.
This includes any inside information we may have about Serco or other companies related to Serco.
We were facing a big crisis. Someone in the company had been falsifying our accounts with a customer. The customer had now found out and was going to pursue charges.
We knew it was only a matter of time before the story got out into the media. And when it did it was almost certainly going to have a very negative impact on us and our reputation. So we were meeting to discuss how we could best handle things.
Clearly the very best thing was to be completely honest and transparent, co-operate in every way with the investigation, and do our very best to make all reparations to our customer.
Then someone in the meeting wondered what the impact on our share-price would be. It was an important question as at that particular time we were trying to raise capital to finance a whole new area of our business.
There was one person who complained that this was going to mean his own stock options would go down in value. I remember the look our boss gave him. It was the nearest thing to contempt I’d ever seen on his face. He said, ‘We are only worth the trust others place in us. And we’ve just been found untrustworthy.’
About a year later I took extended leave. When I got back, I learned that the person who had grumbled about his stock options was no longer with us.
I asked what had happened to him. It seems that after that meeting, just before the media storm began, he had acted to ‘short’ shares in the company, knowing that the price would go down. The person who told me was obviously still angry about it. ‘They threw the book at him, and quite rightly. He behaved just like some war profiteer – trying to benefit from the misfortunes of the very company he was supposed to be loyal to. I doubt he’ll ever get another job with this on his record.’
I asked how our boss had taken the news. ‘I tell you,’ he said, ‘I’ve never seen such a look on his face. It wasn’t just hurt. It was total contempt.’
As part of our job, we may learn non-public information about Serco or its related companies. In that case, we cannot and must not use it for personal or financial benefit
We’d clearly been doing well over the last year, and I could see that our managers and directors were very optimistic about the health of the company. So I decided on the strength of that to invest quite a lot in buying some shares.
It’s proved to be such a good decision that I’ve done far better than I ever hoped. But now I’m worried – am I guilty of doing something illegal?
It’s a horrible situation. One of our best managers is in trouble. It seems he had been told by a colleague about a merger that one of our partners was about to complete. The news hadn’t been made public, but he thought he’d help his mother to buy some shares on the strength of it.
He wasn’t going to benefit in any way. It was just a gift - for his mum.
We heard a colleague talking about how he’d just bought some shares in our company. He said he’d reported what he was going to do beforehand. But it’s interesting how almost as soon as he made the purchase the stock went up. Another colleague said to me, ‘Hmm, fishy or what? Maybe he knew something. But if he did. he’s got away with it.’
I don’t know if it’s right or wrong.
A little bonus
The front-line team has been wonderful. In difficult times they’ve gone the extra mile and more. One of them often gives me tips on which horse to back in the races. Sometimes I’ve had a little flutter – and so far I’ve won more than I’ve lost. So when I heard that the government was going to change some regulations that would have a really beneficial impact on one of the companies we do a lot of business with, I gave him the word.
I know none of the team will be able to buy a lot of shares, but it would be so nice if they could get a little bonus at least.
A sign of confidence
One of our board members has just bought 10,000 shares of stock in the company. He’s notified us so we have made a Stock Exchange Announcement. He says he wants it to be a sign of the confidence he feels in the company’s future.
But isn’t that trying to manipulate the market?
If someone who works for a company and knows something that could affect its share price, and tries to get an undue advantage from using that insider information to make money by buying or selling company shares, this is called ‘insider trading’ or sometimes ‘insider dealing’.
It’s unfair, it’s illegal, and there are extremely serious consequences for anyone - and any company - involved in it.