What Is Inside Information + How And When To Disclose It (MAR Guide)

1. What is Inside Information Under MAR?

According to Article 7(4) of Regulation (EU) No 596/2014, inside information is information of precise nature “which, if it were made public, would be likely to have a significant effect on the prices of financial instruments derivative financial instruments, related spot commodity contracts, or auctioned products based on emission allowances shall mean information a reasonable investor would be likely to use as part of the basis of his or her investment decisions.”

Within the definition of inside information under MAR, there are a few key elements that are important to understand. 

2. How to Identify Inside Information

In order to fulfil your obligations under MAR, you need to know how to identify inside information as defined in the regulation. This checklist will help you decide what is and what isn’t inside information: 

2.1 The information has not been made public yet

By definition, only information that has not been made public can be classed as inside information. If the information could have been deduced by someone observing the company without access to any private and confidential documentation, or by piecing together other information that is already publicly available, it should not be classed as inside information. Similarly, any details that are available in the media or on the internet, or which has been reported to the market already, are now public information. 

If the information is genuinely still private and doesn’t fall into any of the above categories it could be inside information. 

2.2 The information would significantly affect the share price if made public

There is confidential information that, if disclosed, might bring publicity or intrigue, but which would not affect the share price or the price of any other financial instrument. This is not inside information 

Information that will, when publicised, make a significant change to the organisation’s share price either positively or negatively, could be inside information. To fulfil the definition of ‘precise information’, the event or circumstances to which the information relates must exist or be reasonably expected to occur. You don’t have to say whether the price will go up or down, or by how much, but you must be certain that it will make a significant difference. 

2.3 The financial instrument is included in MAR

MAR covers the following financial instruments that are:

• admitted or requesting admittance to trading on a regulated market
• traded, admitted to or requesting admittance to trading on a multilateral trading facility (MTF)
• traded on an organised trading facility (OTF)
• not covered in the previous points, but whose value is dictated by or dictates the price of one of those instruments. 

2.4 It could be deemed inside information when combined with other information

It might be that you plan to take a certain course of action or have already changed something that, on its own, does not constitute inside information according to the points above. However, when combined with other information, either from internal or external sources, it could then affect the share price if disclosed. This could make it inside information.   

3. Examples of What Could be Inside Information

If a company is about to make a special dividend to shareholders, that will affect the share price when it is made public. Being seen to pay cash dividends might increase the popularity of the stock and increase the price, whereas paying dividends in stock might have a negative short-term effect on the price. Either way, because news of this dividend is likely to have a significant effect before it is made public, it could be inside information.

If two companies are planning a merger, this often significantly increases the value of the shares of both entities. Knowledge of this merger before the details go public could therefore be deemed inside information.  

4. All About Disclosure of Inside Information

In order to minimise the risk of insider trading, MAR states that “an issuer shall inform the public as soon as possible of inside information which directly concerns that issuer.” To do this, the issuer should use “a manner which enables fast access and complete, correct and timely assessment of the information by the public.” 

This means sending out press releases to the financial and industry media, informing the financial market authorities and detailing the inside information on your website for a period of not less than five years. You should ensure the information is available free of charge and simultaneously across the European Union. It is important that you attempt to reach as wide a section of the public as possible, using means that will not disadvantage some people. 

The issuer should be certain not to combine the notice of inside information with any marketing of their activities. However, the notice should include these technical standards issued by the European Securities and Markets Authority (ESMA): 

• A clear headline and summary that presents the facts and does not mislead 
• A clear statement that the notice is to declare inside information 
• The date and time of the notice
• The full legal name of the issuer
• The name, surname and position in the company of the person creating the notice

You should distribute the information in English as well as the languages deemed acceptable by the competent authority in each of the member states in which you operate. 

4.1 Delaying Disclosure of Inside Information

You must meet three requirements to be able to delay disclosing inside information. They are: 

• If disclosing immediately would harm the interests of the issuer
• It is unlikely the delay would mislead the public
• The issuer can guarantee it remains confidential

If all of these points apply, you must document your decision to delay disclosure, which should include: 

• When the inside information came into being
• The date and time you decided to delay disclosure
• The date and time you expect to disclose the information to the public
• Name of the person or persons responsible for the decision to delay disclosure
• Details of how you fulfil the requirements for deferring disclosure

This means that you need to be meticulous with your record-keeping during the deferment period to show that you were compliant at every stage. Using an online tool such as InsiderLog helps to collate the information you need and to keep these records safe and secure. 

4.2 Unlawful Disclosure of Inside Information

On occasion, there may be an unlawful disclosure of inside information, which would provide an unfair advantage for certain individuals. It might be when a PDMR or other insider tells another party about it in a social setting. It might also occur when there is a selective briefing of parties, which is in contravention of the requirement to present the information across the union simultaneously. 

In this case, the competent authority can impose the appropriate MAR penalties, including the suspension of trading for the issuer.

5. Controlling and Handling Inside Information 

As soon as it becomes apparent there is inside information and that the company will delay disclosure, you must create an insider list. These are dynamic lists of those in the organisation who have access to that information. There is a permanent insider list, which, if used at all, should be limited to very few people such as the CEO, potentially the CFO and similar roles depending on the organisation. The event-driven insider list includes anyone who gains access to the particular piece of inside information. This list should be updated continuously, e.g. when new people become aware of the information.

With InsiderLog, digital insider lists are created and maintained online, saving considerable time and making MAR compliance feel easy. Insiders enter the details themselves, and automatic reminders help ensure all reasonable steps have been taken, in line with MAR. 

6. Training Your Employees to Spot Inside Information 

It is the issuer’s responsibility to declare inside information immediately or to defer disclosure as soon as they can. This is why you need your workforce to be vigilant for inside information and encourage them to report it so you can act in a timely manner. 

Giving employees guidance in what to look for and what constitutes inside information is necessary to ensure you remain compliant with the EU Market Abuse Regulation. 

7. FAQs

7.1 How is insider trading detected?

Although there are obvious cases of people profiting from insider trading and becoming conspicuous, much of insider dealing is relatively difficult to identify. However, financial authorities across the world, from ESMA in the EU to the FCA in the UK and SEC in the USA are using evermore advanced data analytics to catch low-level activity on their markets.  

7.2 How should organisations publish inside information?

Organisations should publish inside information in as many places as possible to ensure that as many sections of the public as possible can access the information simultaneously. There is also a requirement under MAR to publish the information on the company website for at least five years.