A legal ruling made by a Circuit Court judge has clarified the law in cases of insider dealing, and will have to be taken into account by the Irish Stock Exchange when it is considering any such suspected cases in the future. Colm Keena reports

The series of events that led to Philip Byrne being the defendant in the Republic's first criminal trial for insider trading began six years ago, during a conversation with his golfing pal, solicitor and Dunloe Ewart chairman Noel Smyth.

The saga ended this week when a jury of seven men and five women, having considered the matter for almost eight hours over two days, found him not guilty.

Mr Byrne's relief at the finding was obvious as he was hugged by his partner, two children, other family members and close friends. Because it was a criminal trial there was no issue of his being awarded costs, so he walked out of court an innocent man but carrying a bill for legal and other costs understood to be in the region of €250,000.

The costs are likely to be met eventually by his director's liability insurance cover.

The case was not just a significant event in Mr Byrne's life, but also in the lives of those who deal in or are in some way connected to dealing on or regulating the stock market. The complexities involved in proving a charge of insider dealing were clarified by the case.

The decision of Judge Dominic Lynch, following submissions from defence counsel Mr Paul Gallagher SC, on the issue of whether Mr Byrne had criminal intent at the time he sold his shares, has increased the onus on the prosecution in cases of insider dealing.

Judge Lynch was not swayed by the prosecution argument that the jury had to be satisfied - beyond reasonable doubt - as to only two matters:

that Mr Byrne had been in possession of price-sensitive information at the time he sold 260,000 Dunloe House (now Dunloe Ewart) shares;

that he knew he was selling the shares.

The judge agreed with the counter-argument put by the defence that the jury had to be satisfied that Mr Byrne had price-sensitive information and that, when he sold his Dunloe shares, he was intending to profit by using that information.

The ruling and its implications are to be examined by the Company Law Review Group, which advises the Department of Enterprise, Trade and Employment on changes to company law. "The group has expressed an intention to examine the judgment to see if any issues of substance arise," said a spokesman for the Department.

One source said the group may consider the issue of whether criminal liability should apply in insider dealing. Criminal liability is the difference between, for instance, a speeding offence and murder. In law you cannot murder someone by accident, you have to have intended to harm or kill the victim. However, you can be found guilty of speeding even if you were unaware at the time that you were committing a crime.

The ruling by Judge Lynch is also to be considered by the Association of Irish Investment Managers, and will in future have to be taken into account by the Stock Exchange when considering instances of suspected insider trading.

The Byrne case was referred to the DPP after the Exchange had received legal advice that criminal intent was not required for Mr Byrne to have committed an offence.

The section of the Companies Act 1990 that covers insider dealing does not address the issue of intent.

The Garda Bureau of Fraud Investigation is currently investigating three instances of suspected insider dealing, including one involving Mr Jim Flavin, DCC and the sale of Fyffes shares, which yielded a profit of €85 million (£67 million).

The ruling by Judge Lynch will now form part of the backdrop to any decision as to whether certain of these cases should be sent forward to trial. The three cases will be the last ones to be investigated by the bureau.

From November 28th, 2001, the Office of the Director of Corporate Enforcement (ODCE) took over the role up to then played by the bureau in insider-dealing investigations. In future, the ODCE will conduct investigations referred to it by the Stock Exchange and, if it believes it is warranted, refer cases on to the Director of Public Prosecutions.

The ruling by Judge Lynch will be taken into account by the office when it is making such decisions. The ODCE has not yet had a case referred to it by the Stock Exchange.