A man who has pleaded guilty to insider trading has been told by a judge she is considering a sentence of eighteen months but will review her decision in February.
Declan Service (63) is to lodge the equivalent of £60,000 (€69,310) with his solicitor to fund a fine before the judge reviews his sentence and any terms associated with it on February 19th next.
The court heard Service had been “gambling” with his pension fund and that it had been “inevitable” that his decision to trade using insider knowledge would invite suspicion.
Service, with an address at Sunnyvale Avenue, Portrush, Co Antrim, is understood to be the first person to be convicted in the State of insider trading contrary to the European Union (Market Abuse) Regulations 2016 and the Companies Act 2014.
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The court heard that the father of three adult children works as a carer for vulnerable people, has spent all of his career in the healthcare sector, has had lifelong mental health issues, and has been a valued volunteer with a number of bodies.
The offence involved the sale of 3,893,820 shares in Open Orphan plc, an Irish company quoted on the London Stock Exchange, in May 2020, at a time when Service had been told confidentially of a plan to issue new shares at a discount to the then market price.
At the time of his illegal trades Service’s shares in the company had a value of approximately £566,000, Fionnuala O’Sullivan, for the Director of Public Prosecutions, told Judge Elma Sheahan, in the Dublin Circuit Court.
Because he was a substantial shareholder, Service had been contacted by the CEO of the plc by email on Monday, May 18th, 2020, and offered the opportunity to take part in presentations from the company that would contain market sensitive information. He was told that if he wanted to take part he would become an “insider” prohibited from trading in the company’s stock until the information he received was made publicly available. Service took up the offer and learned of the company’s plan to issue discounted stock on the following Friday.
The next day, he contacted Goodbody Stockbrokers and told his broker to sell all his shares in Open Orphan. “They are going to do something on Friday that might lower the price a bit,” Service said. “I would put next year’s holiday money on it if I were you.”
Det Garda John Farrelly, of the Garda National Economic Crime Bureau, told Ms O’Sullivan that it was standard practice that all calls between stockbroker clients and brokers were recorded, that clients knew this, and that this was the case with the call from Service.
After receiving Service’s instructions, the Goodbody broker raised his concerns with the firm’s compliance officer. Stockbroking staff are trained not to tip off clients when they have suspicions the clients may be involved in insider trading, the court was told.
As instructed, Goodbody sold Service’s entire shareholding between May 19th and 21st, realising slightly more than £566,000. Meanwhile, he was directed to another broker in the firm with whom he placed an order to subscribe for the shares that were to go on sale on Friday, at a discount of 26.4 per cent of the then market rate.
Service asked that shares worth £566,000 be purchased at the discounted rate, but as the share offer was oversubscribed, Service was only able to purchase shares worth £50,000 in this way. He then used the rest of the money from the earlier share sales – £516,000 – to buy Open Orphan shares on the open market at a point when the rest of the market had the same information as he had.
At the end of the Friday, Service again had shares worth £566,000 in Open Orphan, but 92,725 more shares than had been the case earlier in the week, Dec Garda Farrelly confirmed to Ms O’Sullivan. A later calculation by the Central Bank of Ireland concluded that Service had profited by £11,500 approximately at the end of the Friday.
Goodbody submitted a suspicious transaction report to the Central Bank which in turn contacted the gardaí the court was told. On September 13th, 2022 Service presented himself voluntarily at Irishtown Garda station, Dublin, where he made a full admission in the presence of a solicitor.
Brian Gageby, for Service, said the money invested in the shares was his client’s accumulated pension fund which had been converted in 2015 to an approved retirement fund. The entirety of the fund was invested in Open Orphan shares.
He said Service, in his statement to the gardaí, had said he “truthfully did not realise that I had done anything wrong” until it was explained to him and that it was “not in my DNA to do something I know to be illegal”.
His client did not own other shares or have the trappings of wealth and was currently earning €350 as a carer, Mr Gageby said. He had converted his pension fund in 2015 and begun investing in stocks and shares, and did not treat his pension savings with the care that he ought to. He was “effectively gambling on the Stock Exchange”.
Mr Gageby said his client had a range of mental health issues for which he had been receiving care since 1994, had received treatment for excessive consumption of alcohol, had bowel and prostate cancer, and has moods during which he could overspend and exhibit poor decision-making. He is currently engaged in divorce proceedings and is in a relationship with a new partner for twelve years. He moved to Northern Ireland in 2020.
Letters in support of Service were read out to the court, including one from Cabinteely Football Club, in praise of his volunteer work. His client “engaged perhaps to an unusual extent in good works” and had not come to the attention of the gardaí since the 2020 offence, Mr Gageby said. He had no previous convictions.
His client was “not some class of high-rolling, stock-dealing person” and it had been “absolutely inevitable” that his instructions to Goodbody would invite suspicion.
Judge Sheahan said the offence, which carries a maximum sentence of up to ten years, was at the lower range and she took a number of mitigating factors into account, including the guilty plea. When it was confirmed that Service still owned the Open Orphan shareholding, she said she would review her decision on a sentence of eighteen months in February, by which time Service should have lodged Wednesday’s euro equivalent of £60,000 with his solicitor to pay for a fine.
He was remanded on bail to that date.
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