Under the CJA, inside information is defined as information that:
- relates to particular securities or to a particular issuer of securities;
- is specific or precise;
- has not been made public (as defined in Section 58 CJA); and
- if it were made public would be likely to have a significant effect on the price of any securities.1
Under UK MAR, inside information is:
- information of a precise nature;
- which has not been made public;
- relating, directly or indirectly, to one or more issuers or to one or more financial instruments; and
- which, if it were made public, would be likely to have a significant effect on the prices of those instruments or on the price of related derivative instruments.2
Information is of a precise nature if it indicates a set of circumstances which exists or which may reasonably be expected to occur where the information is specific enough to enable a conclusion as to the possible effect that set of circumstances or event has on the price of a financial instrument or related derivative, related spot commodity, or auctioned product based on emission allowances.3
Significant effect on the prices of the relevant instruments means information a “reasonable investor” would be likely to use as part of the basis of his investment decision.4 UK MAR sets out that such an assessment has to take into consideration all available information, including the anticipated impact of the information in light of the totality of the issuer’s activity, the reliability of the source of information, and any other market variables likely to affect the financial instruments,5 such as the consensus of market analysts’ expectations.6
Intermediate steps in a protracted process can be considered inside information by themselves, if, they satisfy the above criteria.7
For persons executing client orders, inside information can include information conveyed by the client relating to the client’s pending orders.8
More detailed definitions of inside information apply in relation to commodity derivatives and emission allowances.9 For more, see MAR Article 7(1)(b)-(c), here.
1 Criminal Justice Act 1993 (CJA), c. 36, § 56 (UK).
2 Regulation 596/2014 of the European Parliament and of the Council of 16 April 2014 on market abuse (market abuse regulation) (MAR), as retained in the UK by the European Union (Withdrawal) Act 2018 (EUWA) and amended by theMarket Abuse (Amendment) (EU Exit) Regulations 2019/310, art. 7(1)(a).
3 Id., art. 7(2).
4 Id., art. 7(4).
5 Id., Recital 14.6.
6 European Securities and Markets Authority (ESMA), Questions and Answers on the Market Abuse Regulation (Version 17), A5.12.
7Id., art. 7(3).
8 Id., art. 7(1)(d).
9 Id., art. 7(1)(b)-(c).