'Wow' Factor argued by Central Bank of Ireland in a rare Irish Insider Dealing case

Not often, in fact exceptionally rare, that there is news of insider dealing cases being brought in Ireland. But that is a topic for another day.
​
For today (1 May 2022), a Panel of Assessors has, according to reports in both the Sunday Business Post and The Sunday Times [see links #1 & #2 below] concluded that Philip Lynch had indeed traded on insider information, but that there were mitigating factors in the case.

The independent and expert panel concluded that Mr Lynch should receive a public caution, a penalty of €75,000; a disqualification for five years from being involved in any financial services provider; and that he should pay the Central Bank’s legal costs of €37,500. It is reported that Mr Lynch — who has been chief executive of two publicly listed companies in Ireland, One51 and IAWS — has accepted this outcome as punishment for contravening market abuse regulations while he was a director of C&C, which makes Bulmers cider.

The case relates to a ten plus year investigation / inquiry into Mr Lynch buying 200,000 shares in C&C in 2008, when it was searching for a new chief executive. John Dunsmore, who was previously the chief executive of Scottish & Newcastle, became CEO in November 2008.  The news sent shares in the company up over 26 per cent to €1.45. [see link #3 below] 

Last week, the Central Bank lodged High Court proceedings against the businessman as part of the enforcement process of its findings.  The Central Bank issued its finding on December 22 last year and told Mr Lynch it would apply to the High Court to confirm the sanctions.  The case is  listed for hearing on the advance warning list under Ms Justice Mary Irvine on 23 May 2022 according to court records.

Before the Panel of Assessor, the Central Bank had argued that Lynch ought to face a penalty of between €250,000 and €500,000, a public reprimand, and a period of disqualification for five years, because it argued the infringement was within the moderately serious range. The Central Bank's enforcement division argued that it was “beyond a reasonable doubt” that Mr Lynch was in possession of “inside information” when he bought shares in C&C on October 21, 2008. He was aware Dunsmore’s appointment would provide a “wow” factor in relation to the company’s share price.

Lynch’s lawyers argued the sanctions were disproportionate, saying while he was aware of negotiations with Dunsmore, he was not certain of his appointment when buying the shares. His lawyers argued that there was no possibility of him making a short-term gain due to a one-year embargo on directors selling shares.

Back in 2013 C&C was fined € 90,000 by the Central Bank for failing to keep up-to-date records on its “insider” list, the second time the financial regulator has taken action against a non-financial services firm. Between January 2nd, 2008 and January 29th, 2009, the Dublin- and London-listed firm was found to be in breach of the insider list requirements of the Market Abuse Directive. It failed to “regularly and promptly” update its insider list with the identity of people working for C&C who had access to inside information. It also failed to state on the list the date of each and every occasion on which it was updated. [see link #4].

If you are interested in reading about insider dealing case history in Ireland, although it is seven years old, see link #5, 'Lose lips and share flips'. 

Links below to source material:

1. https://www.businesspost.ie/legal/central-bank-finds-philip-lynch-engaged-in-insider-trading-at-cc-ba308779
2. https://www.thetimes.co.uk/article/ex-c-amp-c-director-hit-by-landmark-insider-deal-fine-5npwnz7qc
3. https://www.irishtimes.com/business/markets/market-news/c-c-fined-90-000-by-financial-regulator-1.1254196
4. https://www.irishtimes.com/news/c-c-shares-rise-as-dunsmore-appointed-ceo-1.831402​ 
5.  https://www.independent.ie/business/loose-lips-and-share-flips-31118325.htmll