Matthew Feargrieve: The Culture of Hedge Fund

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Welcome to the Matthew Feargrieve blog. Matthew Feargrieve provides fund managers with all of the key documentation required by their investment funds, including the prospectus and offering documents, sub-fund supplements, Key Information sheets, the fund's constitutional documents, investment management and advisory agreements, and investor side letters.

What is insider trading?

Insider trading is a term you’ve probably heard before. It’s associated with illegal conduct. Alternatively, insider trading made major headlines back in 2003, as a result of the infamous Martha Stewart scandal that sent her to federal prison.
Matthew Feargrieve

An insider is a person who possesses either access to valuable non-public information about a corporation or ownership of stock equaling more than 10% of a firm's equity. This makes a company's directors and high-level executives insiders.

  • Legal Insider Trading

Insiders are legally permitted to buy and sell shares of the firm and any subsidiaries that employ them. However, these transactions must be properly registered with the Securities and Exchange Commission (SEC) and are done with advance filings.

  • Illegal Insider Trading

The more infamous form of insider trading is the illegal use of non-public material information for profit. It's important to remember this can be done by anyone including company executives, their friends, and relatives, or just a regular person on the street, as long as the information is not publicly known.

What happens when you get caught? 

Depending upon the severity of the case, insider trading penalties generally consist of a monetary penalty and jail time.

Section 16 of the Securities and Exchange Act of 1934 requires that when an "insider" (defined as all officers, directors, and 10% owners) buys the corporation's stock and sells it within six months, all of the profits must go to the company. By making it impossible for insiders to gain from small moves, much of the temptation of insider trading is removed. Company insiders are also required to disclose changes in the ownership of their positions including all purchases and dispositions of shares.

Check back for more!

Matthew Feargrieve is a qualified financial services lawyer in the UK and as a commercial lawyer in the Cayman Islands and the Eastern Caribbean. He is also familiar with the regulation of investment funds and management companies based in Luxembourg and Ireland. Learn more about Matthew Feargrieve on his website here. You can also join Matthew Feargrieve's professional network by connecting on his Linkedin page here. Alternatively, you can also read Matthew Feargrieve's news here and watch the Matthew Feargrieve video here

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