Insider Trading Flashcards
(13 cards)
What is insider trading?
insider trading arises when
1) person possess inside information
2) uses that info to buy,sell, cancel or amend an order
3) for himself or for a third party
4) directly or indirectly
when is disclosure to a third party of insider information unlawful?
always, outside of cases in which disclosure is made in the normal course of a professional duty.
can a person give recommendations based on insider info without disclosing?
No, it amount to unlawful disclosure when the persone giving the advice knew or should have known it was based on inside info.
can you use the recommendation or inducement if it was relayed to you?
No, it is insider trading unless you didn’t know and shouldn’t have known it was due to insider info.
what is an insider list? what should it contain? what are notification duties related to it?
a list of all people working for an issuer who have access to insider information, it must be kept updated and provided to the authority upon request.
It must contain identity of any insider, the reason why they are part of the list and when the list was last updated.
the issuer should take reasonable steps to ensure everyone on the insider list acknowledges in writing their duties and possible sanctions.
what is a list of permanent insiders? how is it regulated?
a less burdensome insider list where only people who have regular access to inside info due to their position within the issuer are cited. Available for all issuers, however, when justified member states can opt out and require issuers active on RM for more than 5 years to produce a full insider list.
what are the disclosure requirements for managerial transactions?
1) people in management positions or people close to them
2) need to report any transaction that involves the issuer’s instruments
3) to the issuer and the relevant authority
4) no later than 3 business days after the transaction occurred
5) for any transaction exceeding the 5K euro threshold (which can be increased up to 20K if the regulator agrees to)
what is the scope of disclosure requirements for managerial transactions?
to signal to the market, insiders always have a better picture even without insider info per se.
what is a market sounding?
the preemptive communication of info before a future transaction in order to gauge the interest of investor and gather other information. it can be done by an issuer or a secondary issuer in the case in which the transaction is distinct in size and method of offering from ordinary trading.
when is disclosure of insider info considered market sounding?
when it’s done by a person planning a takeover bid or a merger with another company, provided that
1) it is necessary for investors to evaluate the offer terms
2) knowing if the target is willing to sell is essential to the bid.
can you disclose insider info in the process of market sounding?
yes, as it is considered disclosure in the normal scope of business. this implies that the person receiving insider info in the course of market sounding cannot act upon it and is required to keep the info confidential.
which are the precautionary steps before a market sounding?
1) evaluate whether market sounding will involve the disclosure of insider info
2) summarise in writing the required disclosures and their reason and provide the list to the regulator upon request
3) obtain the consent of the person receiving info to keep it confidential
4) keep a record of all the information given to the receiver in the process of market sounding
when is a person that received info in the context of market sounding free from trade restrictions?
1) when the info ceases to be inside information based on the assessment of the issuer, the issuer shall inform the party asap.
2) when the party verifies he is no longer in possession of insider information (in case he was not notified timely)
