Inside information is the cornerstone concept of the insider dealing prohibition. Its meaning is fixed by Article 7 of the UK Market Abuse Regulation (UK MAR), and only information meeting that definition can give rise to the offences of insider dealing or unlawful disclosure under Articles 8, 10 and 14. Getting the definition right is therefore essential to any wall-crossing, disclosure or trading control.
The four-part test
Article 7 requires four elements to be present. The information must be precise, meaning it indicates circumstances or an event that exists or may reasonably be expected to come into existence, and is specific enough to allow a conclusion about the likely price effect (Article 7(2)). It must not have been made public. It must relate, directly or indirectly, to one or more issuers or financial instruments. And it must be price-sensitive: if made public it would be likely to have a significant effect on price, judged by whether a reasonable investor would be likely to use it as part of their investment decisions (Article 7(4)).
Why it matters
Acting on inside information, recommending that others do so, or unlawfully disclosing it are all prohibited and can attract unlimited FCA penalties and criminal prosecution. Issuers must also disclose inside information to the market as soon as possible under Article 17, unless a valid delay applies, and maintain insider lists under Article 18. Misjudging whether information is “inside” can therefore breach both the abuse and the disclosure limbs of MAR.
Who it applies to
Issuers, their advisers, directors and employees, and anyone who comes into possession of inside information through their work or otherwise.
Related terms
MAR, market manipulation and STOR.