Inside Information Explanation

Inside information is information that:

• Is specific and precise
• Is not publicly available
• Would likely influence the price of the investment if made public

Qualifying investments include shares or debt securities traded on the London Stock Exchange, AIM, or other recognized trading platforms like Acquis.

Key Points

• Accuracy: Doesn’t have to be 100% correct.
• Price effect: You only need to consider potential impact.
• Responsibility: Liability can apply even if you didn’t think the information was inside information.
• ‍Future events: Must have a realistic chance of happening.

Examples: Company results, acquisitions or disposals, plans to raise funds through securities.

Why it is important

Misusing inside information can lead to civil or criminal penalties.

Civil offences relating to insiders:

• Dealing on the basis of inside information
• Disclosure of inside information otherwise than in the course of exercise of employment, profession or duties (known as ‘tipping off’)
• Effecting transactions to give a false or misleading impressions as to the supply or price of qualifying investments or to secure the price at an artificial or abnormal level

Criminal offences relating to insiders:

• Dealing when in possession of inside information
• Encouraging another person to deal when in possession of inside information
• Disclosing inside information otherwise than in the proper performance of the functions of employment, office or profession
• An insider must know that the information is inside information and that he has obtained it from an inside source.
• Dealing would include not only buying or selling shares but entering into related contracts such as options or derivative transactions.

Penalties for market abuse and insider dealing imposed by the FCA:

• Unlimited fines
• Restitution orders
• Private warnings
• Public censure

The penalties for the criminal offence:

• Unlimited fines and/or imprisonment for up to seven years

Behaviour that constitutes market abuse can be a civil or a criminal offence under either regime.

Dos and Don’ts

Do

• Keep information confidential
• Seek legal advice if unsure

Don't

• Trade if you have or may have inside information