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.