Seeming as there are no model answers out there yet, I have shared my attempt at this practice written exercise in hopes of gaining feedback from others. Please feel free to critique or make improvements to my answer
*I would also like to note that I spent additional time correcting my SPAG. As personal feedback, I definitely need to work on perfecting my writing under timed pressure*
MY ATTEMPT AT WRITTEN TASK:
FROM: [Trainee Name]
TO: John Mines
SUBJECT: Re: Senwave Query
DATE: 06/04/2018
Dear Mr Mines,
My name is [Trainee Name] and I am a Trainee Solicitor at Charles & Williams. I am aware you know my supervisor Sam Thompson, who has instructed me to reply to your query regarding your recent disposition of Senwave plc’s (‘the Company’) shares.
SUMMARY
After carefully reviewing your query regarding selling your shares in Senwave, it seems that your actions may amount to ‘insider dealing’. This is because it appears you have, in your capacity as director, used non-public information regarding the profits of the Company, to sell your shares in Senwave.
Nevertheless, there are some defences which you can rely on, but further deliberation is required.
I have outlined a detailed reasoning for my summary, along with potential defences and the next steps to take.
REASONING
The Criminal Justice Act 1993 (‘the Act’) makes it an offence for an individual who possesses inside information, to sell their shares to which the information relates. This applies to your case as:
Firstly, as a director of Senwave, you are considered an ‘insider’ who subsequently gained information about the Company’s financial performance by virtue of your position.
Secondly, information regarding the financial statements of Senwave is considered ‘inside information’ as: (a) it relates to the Company, (b) shows specific information pertaining to the financial performance of Senwave for the year, (c) is information which has not been announced publicly, and (d) if made public, would affect the Company’s share price on the London Stock Exchange.
Finally, as you have disposed of your shares after obtaining inside information at the 1 January 2018 Board Meeting, it appears an offence of insider dealing has been satisfied.
POTENTIAL DEFENCES
There are several defences which can be relied on by the Act, most notably in your case:
- If you can prove that you did not expect the disposition of Senwave’s shares to result in a profit after obtaining information regarding the financial performance at the January Board Meeting; or
- If you can prove that you would have disposed of those shares in the absence of information pertaining to Senwave’s financial performance.
NEXT STEPS
In order to rely on these defences, the onus is on you to provide the appropriate evidence to defend a claim for insider dealing. I therefore recommend taking the following steps:
- Booking an appointment with me or Sam soon to discuss the matter further;
- Collecting documents which pertain to the financial statements of Senwave (including board minutes from the January meeting) – the reason for this is to ascertain whether you certainly dealt with inside information;
- Obtaining receipts from the bank outlining which shares you have dealt with and for how much;
- Identify any individuals who may be able to provide witness statements on your intentions to dispose of the Company’s shares; and
- Refrain from selling any Senwave shares for the foreseeable future. If you do require it as a matter of urgency, then please contact me or Sam first.
In addition, if you are contacted by the police, or any regulatory body such as the FCA, then I advise to also contact me or Sam as soon as possible.
I hope this email provides a clear explanation for your query. Please contact me if you wish to discuss this (or any other) matter further.
I hope to hear from you soon.
Yours sincerely,
[Trainee name]
