Insider dealing

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Insider dealing

Also called insider trading

Definition

Insider dealing is buying or selling financial instruments while holding inside information about them, meaning precise information that is not public and would likely move the price. It also covers cancelling orders and encouraging others to trade on that information. It is a civil offence under market abuse rules and a crime in the UK, EU and US.

INSIDE INFOINSIDER LISTTRADESURVEILLANCESTOR
Fig. 1 · Insider dealing
MAR Article 14 · UK MAR Article 14 · CJA 1993 Part V
Key rulesMAR Article 14 · UK MAR Article 14 · CJA 1993 Part V · Rule 10b5-1 amendments
Applies toAnyone trading EU-listed instruments
RegionsUK · EU · US
01

How it works

Firms control inside information through insider lists, information barriers and watch and restricted lists. Staff with access to deals face pre-clearance and personal account dealing rules. Trade surveillance systems compare trading against news, announcements and the people who knew in advance. Suspicious trades are reported to the regulator through a suspicious transaction and order report.

Insider dealing damages trust in markets and carries heavy penalties. In the UK it is a criminal offence under the Criminal Justice Act 1993 and a civil offence under UK MAR. The EU prohibits it under MAR and requires member states to criminalise it. In the US it is prosecuted under Rule 10b-5. Firms also face sanctions for weak surveillance or reporting.

Step 1Identify inside informationFlag precise, non-public, price-sensitive information early.
Step 2Restrict accessKeep insider lists and information barriers up to date.
Step 3Surveil tradingMatch trades and orders against news and insider lists.
Step 4Report suspicionFile STORs with the regulator without tipping off.
02

The rules

EU · 3 July 2016MAR Article 14Regulation (EU) No 596/2014 on market abuse, Article 14

Prohibits insider dealing, recommending or inducing another person to deal, and unlawful disclosure of inside information.

Anyone trading EU-listed instruments
UK · 31 December 2020UK MAR Article 14Market Abuse Regulation as retained in UK law

Keeps the MAR civil prohibition on insider dealing in UK law, enforced by the FCA alongside its criminal powers.

Anyone trading UK-listed instruments
UK · 1 March 1994CJA 1993 Part VCriminal Justice Act 1993, Part V Insider Dealing

Makes insider dealing, encouraging another to deal and disclosing inside information criminal offences prosecuted in the UK.

Individuals dealing in price-affected securities
US · 27 February 2023Rule 10b5-1 amendmentsSEC Insider Trading Arrangements and Related Disclosures, amendments to Rule 10b5-1

Added cooling-off periods and good-faith conditions to the affirmative defence for pre-arranged trading plans under insider trading law.

Officers, directors and others using 10b5-1 trading plans
03

Common questions

What counts as inside information?

Inside information is precise information that has not been made public, relates directly or indirectly to an issuer or financial instrument, and would be likely to have a significant effect on the price if it were made public.

Is insider dealing the same as insider trading?

Yes. Insider dealing is the term used in UK and EU law, while insider trading is the common US term. Both describe trading on material non-public information, although the legal tests differ between jurisdictions.

What is an insider list?

An insider list records every person with access to inside information about an issuer, with the date and time they gained access. MAR requires issuers and those acting for them to keep these lists and provide them to the regulator on request.