Under the CJA, a person has inside information as an insider only if:
- he knows that the information is inside information; and
- knows that he has it from an inside source.1
There is no explicit knowledge requirement under the Market Abuse Regulation in the way there is under the CJA. But under MAR, there is a rebuttable presumption that where someone has inside information and acquires or disposes of financial instruments (or attempts to do so) he has used that information.3
MAR’s prohibitions on insider dealing and unlawful disclosure of information are of wider effect than those under the CJA as MAR applies to any person or firm in possession of inside information as a result of:
- being a member of the administrative, management or supervisory bodies of the issuer or emission allowance market participant;
- having a holding in the capital of the issuer or an emission allowance market participant;
- having access to the information through the exercise of employment, a profession, or duties; or
- being involved in criminal activities.4
However, there are a number of scenarios where it shall not be deemed that a legal person has used inside information solely based on the fact that the person has inside information. Such legitimate behavior includes:
- where firms have established effective information barriers so that neither the person who made the decision to buy or sell the financial instrument nor any other person who could influence the decision to buy or sell was in possession of the inside information;
- where persons dealing on behalf of a third party trades on the instructions of the third party in the normal course of their employment or duties; and
- where a person has obtained inside information in relation to a public company takeover and uses that inside information solely for the purpose of proceeding with that takeover, provided that at the point of approval of the acceptance of the offer, any inside information has been made public or has otherwise ceased to be inside information.5
The fact that a legal person uses his or her own knowledge in deciding to acquire or dispose of a financial instrument shall not of itself constitute the use of inside information.6There are also defenses in relation to the activities of market-makers and defenses for persons fulfilling obligations entered into prior to obtaining inside information or to satisfy a legal or regulatory obligation. For more, see Article 9 of the Market Abuse Regulation, here.
1 Regulation 596/2014 of the European Parliament and of the Council of 16 April 2014 on market abuse (market abuse regulation) (MAR), Recital 24.
2 Id., art. 8(4).
3 Id., art. 9.
4 Id., art. 9(5).
5 Criminal Justice Act 1993 (CJA), c. 36, § 57 (UK).