Fraud Risk Scenario:
An executive of a company informs a close contact (family or friend) about an upcoming public takeover bid (M&A) for the company, information that has not yet been made public. The recipient of this privileged information then makes substantial purchases of the target company’s shares through their brokerage account shortly before the official announcement, which significantly drives up the stock price.
Detection:
Investor behavior analysis: Algorithmic monitoring of unusually large or abnormal transactions compared to the investor’s historical profile and financial means.
Temporal correlation detection: Alerts on concentrated buy orders for a specific security in the days or hours preceding a sensitive announcement (results, M&A).
Investigation of personal connections: Collaborating with authorities to identify potential familial or relational links between traders and individuals with access to the confidential information.
Market authority alerts: Investigations triggered by regulatory alerts (e.g., from the AMF) regarding suspicious market movements.
Prevention:
Restricted access lists: Strictly limit access to sensitive information (e.g., M&A projects) to only those who absolutely need to know.
Trading blacklists (Restricted List): Formal prohibition of trading in securities involved in sensitive operations for all personnel and their close contacts.
Personal transaction reporting policy: Mandatory declaration of trades on company securities by executives and key employees.
Mandatory awareness and training: Regular training for all employees on insider trading, confidentiality procedures, and the legal and disciplinary consequences of information leaks.
Share Your Feedback:
What tools, techniques, and processes are used to detect and prevent this type of fraud?
