As has been widely reported, the Department of Justice, in coordination with the US Securities and Exchange Commission, is investigating personal stock transactions by multiple politicians earlier this year, before the global financial sell-off, but after their receipt of governmental briefings as far back as January regarding the spread of Covid-19. One senator’s mobile phone was seized by FBI agents seeking evidence related to his stock sales. Those investigations appear to be in their infancy.
Where the UK does not take action on market abuse, the US often does, considering any abusive trade on a US exchange, or which affects American investors or the integrity of its markets, to be within its jurisdiction. It has, through the broad enforcement of its regulatory authority, become the global policeman of market integrity.
And notwithstanding the slight permutations and vagaries of the law of insider trading in the US over the last decade, American regulators almost never decline to pursue insider trading cases of any merit – they present issues of fundamental equity that are the bedrock of financial regulation.
There will come a time when investigators travel once again and extradition requests will not be postponed.
There have been more British traders tried in the US criminal courts for alleged misconduct committed in London than have ever been prosecuted in the UK.
There have been some high-profile acquittals but, confronted with the possibility of a long sentence served far from home, most defendants enter plea deals.
These cases take an average of five years from inception to conclusion, and the process is extremely painful and expensive whatever the outcome.
While the future beyond the current crisis seems hard to envisage, market practitioners are advised to consider the long-term implications of making decisions to improperly capture market profit. The repercussions will last long after coronavirus has faded.
Sara George and Nader Salehi are partners at Sidley Austin LLP