INSIDER TRADING: CVM JUDGMENTS BETWEEN 2016 AND 2021

Abstract

Described as the use of relevant information about a company by individuals with in-depth knowledge of the company to trade shares on the securities market before such information becomes public knowledge, insider trading is a crime defined by the Securities Market Law, Law No. 6,385/76. In fact, this law, in addition to addressing the issue of insider trading, also created the Brazilian Securities and Exchange Commission (CVM), which is responsible for ensuring compliance with fair trade practices in the securities market.

With the topic of insider trading, this paper's main objective is to examine how this practice is legally treated under current laws in Brazil between 2016 and 2021, with a primary focus on the Brazilian Securities and Exchange Commission. To do so, it is necessary to understand and conceptualize the topic, as well as review previous and current legislation, in addition to characterizing the elements necessary to prove insider trading and analyzing some cases of this practice, without intending to exhaust the topic.

The insider, the perpetrator of the crime, misuses information they know due to their privileged position in a company or because they know someone in the business, to buy or sell shares in the market at prices that do not reflect the impact such information may have on price fluctuations.

The misuse of privileged information was introduced into Law No. 6,385 in 2001, through Law No. 10,303, which included Article 27-D. A further update was made in 2017. It explains that the use of relevant information that could generate an undue advantage can result in imprisonment and a fine for the offender.

The research is justified as it will contribute to the understanding of what insider trading is under Law No. 6,385/76 and other related provisions, such as Law No. 6,404/76 and Law No. 7,913/89, in addition to a better understanding of how those who engage in this act are punished. The timeframe chosen for analyzing the Securities and Exchange Commission's rulings covers the years 2016 to 2021, based on an existing analysis of previous years by authors who will be mentioned in this paper.

Furthermore, it is worth mentioning that the focus is national, in cases reviewed by the Securities and Exchange Commission, the first entity to investigate the occurrence of the offense. Thus, the work will enable an understanding of the topic, the evolution of the number of cases, the legal treatment of violations, and how insider trading perpetrators are punished.

The research method adopted was a bibliographical-documentary approach, focusing on a qualitative and quantitative approach. This approach allows for broader public understanding of the topic through the study of previously published bibliographies and the analysis of CVM judgments.

To obtain data, extracts from 35 CVM judgment sessions were analyzed. These judgments indicted more than 150 individuals, more than half of whom received some form of punishment. This study seeks to emphasize the importance of expanding public awareness of insider trading, given that this practice severely impacts the market, causing losses to individuals and even the public sector, in addition to undermining investor confidence.

Objectives of the Study

General Objective

To investigate the legal treatment of insider trading under current legislation between 2016 and 2021 at the national level, focusing on the Securities and Exchange Commission.

Specific Objectives

Conceptualize and understand the meaning of insider trading
Review the legislation governing insider trading
Describe the elements necessary to prove insider trading

Analyze insider trading cases and their judgments