QUESTION ONE A
The most notable offense committed by Masud in his dealings as the lead clinical technical in the pharmaceutical company is in respect to market abuse. Market manipulation is also known as the intentional and deliberate effort to meddle with the fair and free operation of a market by mainly fabricating misleading and false information or appearance concerning the market, price, or security of a specific commodity(Ajit, 2014)
This omission can occur in various ways, which can mainly entail spreading wrong and misleading information to influence trading decisions by prospective investors or affiliate stakeholders unfairly. Under the United Kingdom Jurisdiction, such offense is generally regarded as criminal acts; however, the Government and associate regulative institutions were dissatisfied with the over-reliance on criminal liability. It warranted a high threshold of the burden of proof for a corporation or an individual to be held culpable for misuse of information resulting in very few successful prosecutions. Thus, the UK government enacted the Financial Services and Markets Act 2000 (‘FSMA’), which established the Financial Services Authority (‘FSA’). Mandated and given the power to investigate and, if possible, impose civil penalties based on the civil burden of proof. Accordingly, FSA has come up with four conditions that have to be met before an act is considered to be an abuse of information regarding Masud situation. They include that the information must be in tandem with the unethical behavior of the individual or corporation. The information must not be readily available in nature. The information must be relevant, and the information must have the aspect of the disclosure. In effect, it is evident that Masud, by his action of falsifying information about the impending validation of the pharmaceutical product, meets all the four requirements. Hence he is culpable of a civil action as he knew very well that the drug failed its initial trial, and would not be accredited by relevant regulatory institutions; thus, he is prima facie guilty of providing and spreading false information the expense of potential investors. This position has been upheld and affirmed in the past decisions of (David Massey v Financial Services Authority: [2011] UKUT 49 (TCC) where it was held that the mere aspect whether such information would affect the market equilibrium was considered to be sufficient to amount to civil liability as regards abuse of information. The position was later affirmed in (David John Hobbs v The Financial Services Authority: FS/2010/0024 ). It has recently been the guiding principle and precedence in handling such omission as abuse of information.
Irrespectively, there is two primary defense available for an act of abuse of information. They include that the behavior of spreading the information in question did not in any way add up to the direct and indirect abuse of the market and that secondly, the defendant took all reasonable actions and precautions in exercising due diligence to avoid any indirect or direct engagement to market abuse intentionally.
Seemingly and according to the facts, Safiya is guilty of insider trading. Insider trading is the trading of securities and stocks by individuals considered to be on the inside of a corporation. As a result, have the leeway or rather the access to confidential information relating to the company. The inside information in question has to have a pertinent and fundamental effect on the company’s ultimate price of shares. In literal terms, an investor who holds private and discrete information about the status of a stock is considered to hold an undue advantage against other investors in the same situation who are not privy to the information in question. Insider trading is considered a criminal offense in the United Kingdom. It is mainly provided for under the Criminal Justice Act of 1993, which provides that dealing in securities as a result of any information which is not publicly known is considered to be a criminal offense. It is further articulated under section 8 of the Market Abuse Regulation (Regulation 596/2014) which criminalizes the disposing of any sort of equity or security due to indirect, indirect influence of information from any relevant source with a corporation’s structure. It is then evidently clear that Masuds action of disclosing confidential information regarding the status of the corporation to Safiya and intern using them to influence her investment decisions amounts to insider trading and can be ultimately be classified as a criminal activity. In (Ryan v. Triguboff), it was held that any sort of leading information relayed to a third party could be assumed to be classified as insider trading. According to the FCA, such a company can risk their activities being suspended indefinetlyor the culpable persons may further face an imprisonment term of 7 years and unlimited application of fines.
The defenses available to persons accused of Insider trading include that the accused did not expect that the confidential information would amount to a glean of profit. Secondly that the information in question was widely known in many quarters and lastly that the defendant sold and bought shares without due access to the private information.
QUESTION ONE B
Market Code of conduct policy Procedures is fundamental within a regulated share dealing firms for the reasons that are pertinent in protecting the public and stakeholders from unfair trade practice and ultimately achieving and maintaining a certain ethical standard. In my view, the following principles are the most critical aspects when analyzing the best market code conduct applicable in a regulated and share dealing firm. .( Paul,2010)
Disclosure of Holding of any securities by access persons.
To ensure that access persons do not commit unethical trading practices, it is prudent that such persons disclose their securities holding if present to a compliance officer. This can help identify any irregular pattern of transactions involving the portfolio of an individual and whether any fair dealing has been breached.
Reporting Obligation
It is of most importance that in any share dealing firm, the legal department must be steadfast in informing all relevant access persons on the utmost duty of remitting trade confirmations of shares and securities to the in-charge compliance officer. In doing so, the compliance officers, together with the legal department, should provide reports to the inspectorate regulatory organ from time to time describing any sort of issues that may have arisen to compromise the status of fair trade in the corporation. When such reports are procedurally enacted in a market code of conduct, the company can trace and identify any form of unethical conduct and ultimately prevent the person from violations of the code and the law
Restrictions
Gifts, Entertainment, and Favor intended for access persons must be regulated and, as a measure, be prohibited altogether. When access persons are allowed, and in a position to receive such material things from stakeholders it does admonish any foul play and increases the level of transparency within a corporation
Enforcement and Sanctions
It is paramount and recommended that compliance officers and relevant corporation officers impose appropriate sanctions not limited to termination without due notice. The sanctions imposed should be documented and forwarded to the relevant regulatory authority, sanctions may be meted in the form of fines, suspension, termination, disgorgement of profit and even notification to relevant institutional agencies in case of grave omission
QUESTION TWO
The cooperation of intelligence service with other foreign members helps their work serve the national interest of their country. The international cooperation amongst the intelligence service and other international bodies also improves the ends of global benefit, such as preventing WMD proliferation or the prosecution of war criminals. The key significance of international cooperation in intelligence is to protect the right to life by preventing the occurrence of serious threats to the public. It is widely agreed that sharing of information contributes to preventing attacks, hence saving people’s lives. (Gerspacher, 2008) International intelligence cooperation is, therefore, important, and hereinafter, I will provide the effectiveness of the cooperation within the intelligence service in an international regime.
Meets the need for Information and Response to Threats-Most states don’t have the expertise and resources within their intelligence service to prevent all types of threats in the state security or public safety. The political masters and services need information, but they can’t get such information on their own. As a result, the cooperation with Foreign Service by sharing information is essential. It enables the provision of complete and timely intelligence to intelligence consumers such as commanders of the military, law enforcement agencies, and policymakers to advance the quality of making decisions.
Gaining within partners and comparative benefits-Cooperation within partners helps the services gain from partners’ comparative linguistic, geographical, technological, and relational as well as resource advantages in collecting and analyzing information. Many of the services have unique attributes that make a cooperation with the Foreign Service attractive. An example was when Israel’s service had unique access to the émigrés of Soviet Jewish who came to Israel in 1950 and 1960. The Israel service gave valuable information on how life is in the USSR to the US service on the grounds of debriefing the immigrants. The geographical position of a country that includes its access to airfields, ports, optic cables, fiber, and proximity is a key reason for the international cooperation regime that aids global investigation and exchange of intelligence and evidence. Additionally, the technological know-how of a foreign service can be more attractive in SIGINT, which is the main draw for cooperation within services and the NSA.
Giving different perspectives- The exchange and analysis of intelligence with foreign partners will give the service an alternative or different perspective on key matters that would challenge their assumptions. The services that have a close relationship mostly solicit comments on some strategic issues. In the relationship within UKUSA, the exchange of information amongst the services and between the joint Intelligence committee from the UK and the National Intelligence Council from the US has been continuous for many years. (Hayez, 2011)
Dividing Labour and sharing of Burdens-When foreign partners cooperate, Labour is divided, and resources are saved. The technology in the US Intelligence is long-established, and many allies can’t duplicate US SIGINT capacity. They have, however, created a HUMINT is a place where US service has been underperforming. The services from small states can get valuable HUMINT to get enough insights to give the US while enjoying the advantages of US SIGINT.
Reduces the risk that comes with Intelligence-With the cooperation between foreign partners, services can avoid risks that comes with intelligence activities. The HUM IN intelligence activities in volatile areas can be dangerous. The presence of cooperation makes it safe to conduct intelligence activities.
Intelligence promotes multilateral agreements and decision making-Sharing information amongst the intelligence services and other international bodies is essential and promotes the assessment of scenarios and similar outlooks.
Provides an environment to backchannel Negotiations-The cooperation among foreign services gives room to propel discussions that are expected to be kept off the public amongst many states. This promotes mutual agreements, dispute resolution as well as peace agreements. The discussions might not be between services, but representatives from a state will do the negotiations with the other state’s leadership. An example was the negotiations between Israel and Jordan in 1990, making the two countries sign a peace treaty. (Born, 2012)
Supports International Criminal tribunals and peacekeeping missions-When the intelligence services share information, peacekeepers can do their work because the military commanders shall be aware of their presence. The transfer of such information benefits in situations where international peacekeepers have limited intelligence. The cooperation also helps in prosecuting war criminals by getting information and evidence from the Foreign Service.
QUESTION THREE A
The risk associated with information such as fraud being relayed to the public can be immense. Fraud can substantially affect a business despite its size. Considered, no action is taken by the firm to counter the notification of the fraud to the public; the company may face the following risk.(Chene,2009)
Financial Loss
Financial loss is the most evident risk associated with fraud. For example, in the scenario in question, it would affect the firm’s share value as stakeholders and investors may fancy withdrawing their securities. As a result, the alleged fraudulent activity by the firm.
Confidence in the public eye
The moment a fraudulent activity is alleged to have happened to a firm, its public image would immensely suffer from irreparable damage. As a result, the firm would be in a position of financial loss as it would one among other factors even forced to pay a higher value for credit as it is not trustworthy given the raised allegations
Company Morale
Employers’ and employees’ general morale in a firm set up can immensely dwindle and reduce as a result of the embarrassment of the situation or allegations leveled against a firm in connection to fraud. Furthermore, even if the firm’s workers move on forward to another contractual employment, they may still carry on the association of fraud with them irrespective of their involvement.
Increased operational Costs
Considered that it is legally required that a firm files an annual audit report. The auditors in a scenario where it’s faced with fraudulent activities be very strict and would strive to scrutinize every bit of the company’s financial statements; hence the cost of the audit may exponentially grow.
QUESTION THREE B
Whistleblowing is a situation where employees, employers, and members of a particular board raise concerns about an improper and unethical act. The disclosure may be internal or external, including one that may be directed to specified regulators; all these regulations are provided for under the Public Interest Disclosure Act 1988. (PIDA).Whistle blowing is pertinent and fundamental in the societal structure as it strives to reduce bad and unethical behavior in workplaces.Whistleblowing is not a walk in the park and a whistleblower can face many hurdles in pursuit of it, and literal terms can even amount to career suicide. As a result, it is paramount that the identity of a whistleblower in question is firstly confidential and that he or she be secondly be protected from impending actions of retaliation. In this regard, the two fundamental steps are securing the confidentiality and protection of the whistleblower and investigating and looking at the validity of the allegation in question. When a whistleblower’s identity is confidential, he or she can avoid resulting retaliation that may be in the form of a reduction in the value of compensation, threats related to physical harm, poor work assignment, and most importantly, termination from employment. The protection of whistleblowers under the United Kingdom is enshrined under the Public Interest Disclosure Act of 1998, which amended the Employment Rights Act of 1996. The Act is responsible for protecting whistleblowers who may be victims of retaliation due to their actions.
The second step that a regulator ought to do is to ascertain the validity of the reported information. In doing so, they take every concern seriously and strives to investigate and determine whether the allegations hold any water while affirming its credibility. The next step is to take practical actions as articulated by legislations.
QUESTION FOUR
To have an effective culture of financial crime prevention, a compliance culture is necessary. A compliance culture is based on the organization’s reputation, which is present, sustained, nurtured, and protected through a combined commitment and adopts its values every day. It requires more than the observance of the regulatory or legal requirements. Therefore, individuals should also be committed to doing the right thing and to show the conduct of integrity on a daily basis. To have an influential culture of compliance, there has to be proper leadership. The senior management of the firm has to engage and support the firm’s compliance ethics. The top management or board of directors usually acts as the only guardian of the firm, formulating policy objectives for the firm while also ensuring that the firm stays straight. (Dion, 2008) Therefore, it is logical for any senior management officer to ensure that the firm, for which they are responsible, takes the appropriate measures in providing that ethical compliance is present within the firm’s continuous running. Such compliance is vital and affects all levels of the firm’s daily operations, ranging from senior management to the employees. As a result, the senior firm managers need to use their extensive capability and power to formulate a compliance culture that assures the public that the firm is capable of coping with the increasingly complex international laws implemented globally.
Senior managers should also develop a culture of ethics. Ethical culture is considered as assumptions, experiences, and managing expectations on how the firm can prevent the employees from unethical behavior and, in turn, uphold ethical behaviors. The ethical climate in a firm is significant because it improves employees’ morale, improves commitment in the firm, and helps in retaining the workforce. In the event, senior management does not cultivate or support the compliance culture. Then the firm is not likely to have an effective culture in preventing crime but a compliance program that is on paper. Therefore, leadership must play an important role in ensuring that the firm’s values and ethics are enforced and practiced. The firm’s risk management should be aligned with the compliance, and hence, the program should consider the risk in strategic areas. The firm should also test and train its employees. Investment in training employees on the firm policies as well as prohibited behaviors is important. Such training can be conducted through the assessment of the employee or a continuous policy review. With effective investment in compliance, it would be expensive but significant to the uncontrolled cost of noncompliance. The formulation of a conclusive compliance framework would require an investment of resources and time, which might put off many individuals, but this would be little compared to the legal queues or fines that may arise due to noncompliance. The firm should also have an incentive for ethical conduct that is incorporated in the review of performances.
When compensation is connected to compliance, firm employees are likely to uphold, incorporate, and learn the policies in their daily lives. Compliance mistakes should not be ignored. Because errors often reoccur, the incident should be analyzed to help other individuals avoid making the same error. (Kempa, 2010) The firm needs to be informed that a violation can indicate that specific policies need to be reviewed or modified. However, the firm has to be encouraged to discipline the employees who disregard the firm policies and guidelines. This would motivate all the employees to always comply with firm policies. Good governance would need the individuals to be held accountable hence, a transparent system that lacks immoral dealings and practices is important. Therefore, the firm can set a tone within the firm by using their power and form an oversight program that tackles compliance. They can create a specialized committee that tackles firm ethics, social responsibility, and compliance. The committee can be made of drawn profiles within the firm since the compliance nature is to affect all firm departments. The firm should also put in place an effective technology. Before the struggle of reliability and scalability begins, the spreadsheets can help in tracking the compliance. The solutions provided by technology are likely to alleviate more burden of formulating a program that is repeatable and more consistent.
BIBLIOGRAPHY
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David John Hobbs v The Financial Services Authority: FS/2010/0024
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Financial Services and Markets Act 2000
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Kempa, M. (2010). Combating white-collar crime: serving victim needs and market integrity. Journal of Financial Crime.
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Paul, B (2010) ‘Stock Market Efficiency, Insider Dealing, and Market Abuse: The UK Experience’ International Journal of Business Governance and Ethics.
Ryan v. Triguboff
