A person who invested in a public company received insider information from the company's CEO and used the information to reduce his losses in the company's IPO.
The Court convicted that person based on his admission of use of insider information, while reducing his sentence because the use was made for the purpose of reducing damage and not for the purpose of making a profit. An insider is a company official, a member of his family, or a corporation controlled by him or by a member of his family. The use of insider information is the utilization of access to information by one of these, to create an unfair advantage in securities trading over a public investor who is not exposed to it. However, when the use is made for the purpose of reducing a loss, the use may be considered a less serious offence. Here, although the person is not a classic insider, he was exposed to insider information from a person who had the insider information and therefore he is considered as such. Nevertheless, because the use of the information was done to reduce a loss, with the aim of returning to holding the company's securities in a similar amount and with a lower investment, this is a less serious act than using inside information for the purpose of making a profit and he was sentenced to 4 months imprisonment to be served by way of community service, 6 months probation for three years and a fine of ILS 50,000.