An Insider Trading Bill is pending before the Cypriot parliament which, when enacted, will constitute a comprehensive legislative code dealing with all aspects of insider trading. The provisions of the Bill are based on the EU Directive on Insider Trading (Dir, 89/592, OJ 1989 No. L334/30) as well as insider trading legislation in the UK. Until the Bill becomes law, insider trading is controlled, albeit unsatisfactorily, by rules derived from general law. The protections against insider trading available under general law may be summarized as follows:
- Where a trader makes an affirmative misrepresentation about the security to his or her counterparty, he or she may be liable under the tort of misrepresentation;
- Where a trader omits to disclose a material factor about a security he or she may, in exceptional circumstances, be liable for non-disclosure. Generally, there is no liability for non-disclosure;
- Where a fiduciary or confidential relationship can be found, there is a duty of good faith which entails an obligation of full disclosure and avoidance of profiting from undisclosed conflicts of interest.
In addition to the above, there are provisions in the Cypriot Securities and Stock Exchange Law and the Companies Law designed to curb insider dealing. For example, under the Securities and Stock Exchange Law issuers must promptly publicize any significant new factors affecting the company's securities and maintain the utmost secrecy in the meantime. Any person who makes a false, misleading or fraudulent statement or who conceals material with respect to a stock exchange transaction is guilty of a criminal offence punishable by imprisonment or fine. All members of the Stock Exchange must adhere to the standard of due care in securities dealings set out in the Rules of Conduct. These by implication give rise to a duty not to abuse their position of trust and confidence in the event that they possess price-sensitive information.