5-2 What is "Inside Information"

Definition

(1) "Inside Information" is defined in section 95(2) as meaning information of a Precise nature which, in relation to Financial Instruments or Related Instruments which are not Commodity Derivatives:
(a) is not generally available;
(b) relates, directly or indirectly, to one or more Issuers of the Financial Instruments or to one or more of the Financial Instruments; and
(c) would, if generally available, be likely to have a significant effect on the price of the Financial Instruments or on the price of Related Instruments.
(2) "Inside Information" is defined in section 95(3) as information of a Precise nature which, in relation to Financial Instruments or Related Instruments which are Commodity Derivatives:
(a) is not generally available;
(b) relates, directly or indirectly, to one or more such derivatives; and
(c) users of markets on which the derivatives are traded would expect to receive in accordance with any Accepted Market Practices on those markets.
When is information "Precise"?
(3) To be "Inside Information", information must be of a Precise nature. Section 95(5) states that information is "Precise" if it:
(a) indicates circumstances that exist or may reasonably be expected to come into existence or an event that has occurred or may reasonably be expected to occur; and
(b) is specific enough to enable a conclusion to be drawn as to the possible effect of those circumstances or that event on the price of Financial Instruments or Related Instruments.
(4) The Regulator may also consider that where a protracted process intends to bring about or result in particular circumstances, those circumstances and the intermediate steps of the process which are connected with bringing about such circumstances can also be deemed to be "Precise" information.

When is information "generally available"?
(5) Information is only "Inside Information" under the definition in section 95(2) if it is not generally available and has not been made available to the public. The FSMRs do not define what is meant by "generally available", although section 95(8) states that information which can be obtained by research or analysis conducted by, or on behalf of, users of a market is to be regarded as being "generally available" to them.
(6) The following factors are, in the Regulator's view, likely to indicate that information is "generally available" (and therefore is not Inside Information):
(a) if the information has been the subject of a disclosure to the market through a Regulatory Announcement Service or otherwise in accordance with the rules of the relevant market or a requirement in a law;
(b) if the information is contained in records which are open to inspection by the public;
(c) if the information is otherwise generally available, including through the Internet, or some other publication (including if it is only available on payment of a fee), or is derived from information which has been made public;
(d) if the information can be obtained by observation by members of the public without infringing rights or obligations of privacy, property or confidentiality; or
(e) if the information can be obtained by analysing or developing other information which is generally available.

For example, if a passenger in a vehicle passing a burning factory calls his broker and tells him to sell Shares in the Company that owns the factory, the passenger will be acting on information which is generally available, since it is information which has been obtained by legitimate means through observation of a public event.
(7) It is not relevant, in the Regulator's view, in relation to information referred to in paragraph 4 that:
(a) the information is only generally available outside the ADGM; or
(b) the observation, research or analysis is only achievable by a person with above average financial resources, expertise or competence.
When will information have a "significant effect on price"
(8) Information is only "Inside Information" under the definition in section 95(2) if it would be likely to have a significant effect on the price of the Financial Instrument or a Related Instrument. Information would be likely to have a "significant effect on price" if and only if it is information of the kind which a reasonable investor would be likely to use as part of the basis of his investment decisions (see section 95(6)). In the Regulator's view, if information is of a kind which a reasonable investor would be likely to use as part of the basis of his investment decisions, then the "significant effect on price" test will be satisfied.

Trading Information
(9) Section 95(4) provides that information about a person's pending orders in relation to a Financial Instrument or Related Instrument is also Inside Information. The Regulator considers that information of the following kinds (referred to in this RMC as "Trading Information") relating to pending orders may be Inside Information:
(a) that Financial Instruments of a particular kind have been or are to be acquired or disposed of, or that their acquisition or disposal is under consideration or the subject of negotiation;
(b) that Financial Instruments of a particular kind have not been or are not to be acquired or disposed of;
(c) the quantity of Financial Instruments acquired or disposed of or whose acquisition or disposal is under consideration or the subject of negotiation;
(d) the price (or range of prices) at which Financial Instruments have been or are to be acquired or disposed of or the price (or range of prices) at which Financial Instruments whose acquisition or disposal is under consideration or the subject of negotiation may be acquired or disposed of; or
(e) the identity of the persons involved or likely to be involved in any capacity in an acquisition or disposal.
(10) A person who executes a Client order does not contravene section 92(2) (Insider Dealing) provided he complies with certain conditions (see Rules 5- 7(8) and 5-7(9) of the RMC).

Carrying out of own trading intention
(11) A person will form an intention to deal in a Financial Instrument before doing so. His carrying out of his own intention will not of itself contravene section 92(2) (Insider Dealing).