What is inside information?
Inside information is defined in Article 7(1)(a) of the Market Abuse Regulation (MAR). According to the definition, inside information refers to
- information of a precise nature, which has not been made public, relating to the issuer or to a financial instrument, and which, if it were made public, would be likely to have a significant effect on the price of that financial instrument or on the price of a related derivative financial instrument.
See also Article 7(1)(b) and (c) of MAR for definitions of inside information in relation to commodity derivatives and emission allowances.
Precise nature and significance of inside information
Article 7(2) of MAR defines the criterion related to the precise nature of inside information, according to which the information is deemed to be of a precise nature if it
- indicates a set of circumstances or an event which exists or has occurred or which may reasonably be expected to come into existence or to occur, and
- is specific enough to enable a conclusion to be drawn as to the possible effect of that information on the value of the financial instrument.
According to the criterion related to significance in Article 7(4) of MAR, information which would be likely to have a significant effect on the price means information that a reasonable investor would be likely to use as part of the basis of his or her investment decisions.
Prohibitions of use and disclosure of inside information
If you have received inside information, you are subject to the prohibition against acquisition or disposal of the financial instrument that the information is related to, under Article 14 of MAR. You are also not allowed to advise another person on the acquisition or disposal of the financial instrument. The prohibition against advice also applies to other transactions besides the trading of financial instruments.
Unlawful disclosure of inside information
As a general rule, disclosure of inside information is prohibited. However, disclosure of inside information is allowed if it is made in the normal course of the exercise of the disclosing person’s employment, profession or duties. Inside information may be disclosed only to the extent that it is necessary for the exercise of the disclosing person’s own professional duties.
The drawing up and updating of insider lists is provided for in Article 18 of MAR and in Commission Implementing Regulation No (EU) 2016/347 adopted pursuant to that Article.
The obligation concerns issuers and persons acting on their behalf or on their account.
The European Securities and Markets Authority (ESMA) has specified in its Q&A interpretations the division of responsibility for the drawing up and updating of insider lists between the issuer and the person acting on the issuer’s behalf or on its account.
The person acting on the issuer’s behalf or on its account has an independent duty
According to ESMA’s interpretation, the person acting on an issuer’s behalf or on its account (e.g. advisers and consultants) has an independent duty to draw up an insider list comprising all the persons who have access to inside information and who are working for them under a contract of employment. This duty also includes the submission of the insider list to the competent authority.
An issuer may outsource the drawing up and updating of its own insider list
If an issuer outsources the maintenance of its insider list to the person acting on its behalf or on its account, such as an adviser, the issuer is responsible for the drawing up and updating of its own insider list in accordance with the principles of outsourcing. The person acting on the issuer’s behalf or on its account is responsible for drawing up and updating its own insider list.
If an issuer delegates (outsources) the drawing up and updating of its own insider list to a third party not acting on the issuer’s behalf or on its account, the issuer is responsible for the drawing up and updating of the list in accordance with the principles of outsourcing.
All persons who have access to inside information and who are working for the issuer under a contract of employment or otherwise performing tasks which give them access to inside information, such as advisers, accountants or credit rating agencies.
Issuers or any persons acting on their behalf or on their account must take all reasonable steps to ensure that any persons on the insider list acknowledge in writing the duties entailed and are aware of the sanctions related to insider regulation. A sufficient acknowledgement consists in the insider acknowledging the duties once, after which it is sufficient to refer to the duties and sanctions. If the company so wishes, it may, however, require separate acknowledgement for each project.
Templates for a project-specific insider list and for a supplementary section listing permanent insiders are annexed to the Commission Implementing Regulation (Annexes I and II). Under Annex I, the project-specific insider list must contain the following data:
- First name(s) and surname(s) of the insider, as well as birth surname(s) of the insider if different from current surname
- Professional telephone number(s) of the insider, including work direct telephone line and work mobile numbers
- Issuer name and address
- The insider’s function and reason for being an insider
- Date and time at which the person obtained access to inside information
- Date and time at which the person ceased to have access to inside information
- Date of birth of the insider
- National Identification Number of the insider, if applicable
- Personal telephone numbers (mobile phone number and other home telephone number, if any)
- Full home address of the insider (street name, street number, city, postcode and country).
In addition, the insider list must indicate the date and time of creation of the insider list section, the date and time of the last update as well as the date of transmission to the competent authority.
An insider list is drawn up in electronic format and updated at all times without delay when
- there is a change in the reason for including a person who is already on the insider list,
- there is a new person with access to inside information, who therefore needs to be entered on the insider list,
- a person ceases to have access to inside information.
Each update must specify the date and time when the change triggering the need for an update occurred and the date of the update.
Templates for insider lists
On the basis of the Commission Implementing Regulation, the Financial Supervisory Authority has drawn up templates for a project-specific insider list and a supplementary section listing permanent insiders. An issuer or a person acting on the issuer’s behalf or on its account may manage an insider list using the Financial Supervisory Authority’s list templates or in any other manner fulfilling the requirements of MAR and of secondary regulation adopted pursuant to it.
The Financial Supervisory Authority’s example of a project register (in Finnish)(excel)
The Financial Supervisory Authority’s example of a permanent insiders list (in Finnish) (excel)
Reliable management of an insider list
Under Article 2(4) of the Commission Implementing Regulation, the electronic management of an insider list must ensure
- the confidentiality of the information included by ensuring that access to the insider list is restricted to clearly identified persons from within the issuer or any person acting on the issuer’s behalf or on its account who need that access due to the nature of their function or position
- the accuracy of the information contained in the insider list
- the access to and the retrieval of previous versions of the insider list.
In order to meet the duties described above, the manager of an insider list should name the persons responsible for managing the insider list and their deputies.
The insider list must be stored for at least five (5) years from the time it was drawn up or updated.
On request of the Financial Supervisory Authority, the manager of an insider list must submit the insider list to the Financial Supervisory Authority as soon as possible.
The insider list must be submitted to the Financial Supervisory Authority as an Excel spreadsheet, and its presentation must correspond to the template of the Financial Supervisory Authority (column titles, number of columns and column order).
The insider list must be submitted to the official of the Financial Supervisory Authority who requested it (firstname.lastname@example.org) using a secure e-mail connection.
In addition to a project-specific insider list, an issuer or a person acting on the issuer’s behalf or on its account may draw up a supplementary section concerning permanent insiders. Maintaining a permanent insider list is voluntary. A supplementary section concerning permanent insiders may contain data on only those persons who have permanent access to all insider information within the company.