Insider Trading Compliance In EU: What Issuers Need To Know (2024)

COVID-19 has changed so many aspects of life, and corporate governance is no exception. From refocusing attention on all matters ESG-related to necessitating a shift to virtual and hybrid meetings, the last year has seen companies pivot and adjust in an agile manner. But it is becoming more obvious as time goes on that we may never go back to what was ‘normal’ in 2019 and that we should embrace the changes going forward.

Table of Contents

MAR overview

Inside information

Insider trading definition

Insider lists

PDMR transactions

Market soundings


Related regulations

What are the consequences of non-compliance?


Who is liable for insider trading?

How can businesses ensure adequate records are maintained?


References and Further Reading

MAR overview

Here are the main elements of MAR that relate to insider trading compliance for issuers.

Inside information

MAR definesinside informationin Article 7(4) as information of a 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.”

If the information is yet to be made public and would affect the price of relevant financial instruments protected by MAR, it is inside information. Even information that does not seem to meet those criteria, but, when combined with other information, could give someone an unfair investment advantage, can be deemed to be inside information.

Insider trading definition

The regulation refers to insider dealing, or insider trading, as a situation where:

“a person possesses inside information and uses that information by acquiring or disposing of, for its own account or for the account of a third party, directly or indirectly, financial instruments to which that information relates. The use of inside information by cancelling or amending an order concerning a financial instrument to which the information relates where the order was placed before the person concerned possessed the inside information, shall also be considered to be insider dealing. In relation to auctions of emission allowances or other auctioned products based thereon that are held pursuant to Regulation (EU) No 1031/2010, the use of inside information shall also comprise submitting, modifying or withdrawing a bid by a person for its own account or for the account of a third party.”

Examples ofinsider tradinginclude selling stock or cancelling an order for shares in a company because you are aware of an event that will negatively affect an issuer’s share price, but which is yet to be made public. Similarly, buying stock in a company armed with the inside knowledge that they are about to be taken over or disclose great financial results at the end of the fiscal quarter and the price of their shares is about to rise.

It is also an insider trading offence to solicit a third party to carry out these actions, based on inside information. Innocence cannot be pleaded even if the offender accidentally gains access to inside information or unwittingly passes inside information to another party.

Insider lists

In MAR, Article 18 is dedicated to insider lists. It requires issuers to

  • “draw up a list of all persons who have access to inside information and who are working for them under a contract of employment, or otherwise performing tasks through which they have access to inside information, such as advisers, accountants or credit rating agencies (insider list);
  • promptly update the insider list in accordance with paragraph 4*; and
  • provide the insider list to the competent authority as soon as possible upon its request.”

*Paragraph 4requires organisations to update their list of persons with inside knowledge, or the insider list as soon as possible. The update is required when the reason for their inclusion changes, when someone needs to be added or when someone needs to be removed as they have ceased to be in possession of inside information.

The issuer is also under the obligation to instruct anyone included in theinsider listof their legal obligations not to disclose such inside information or to make trading decisions on the basis of such information.

PDMR transactions

MAR regulates all employee trades but there are strict protocols specifically designed to prevent market abuse by persons discharging managerial responsibilities, or PDMRs, such as executive officers of the company. Article 3 (1.25) defines them in this manner:

“‘person discharging managerial responsibilities’ means a person within an issuer, an emission allowance market participant or another entity referred to in Article 19(10), who is:

(a) a member of the administrative, management or supervisory body of that entity; or

(b) a senior executive who is not a member of the bodies referred to in point (a), who has regular access to inside information relating directly or indirectly to that entity and power to take managerial decisions affecting the future developments and business prospects of that entity;”

PDMRs and any person closely associated(PCA) with them, including immediate family such as spouses and dependent children, relatives living in the same house as the PDMR for more than a year, and business partners and legal entities run by PDMRs, must notify regulatory authorities and the issuer when they enter into personal transactions with the issuer’s financial instruments that exceed a certain value, determined by the local legislation. If the transaction is below the threshold and is executed, the issuer must announce this publicly within three working days.

The reason for this rule is that PDMRs are likely to have an insight into trades and access to inside information that gives them an unfair advantage over regular investors in such transactions. PCAs, therefore, could wittingly or unwittingly access that information, too.

Market soundings

In Article 11(1), the definition of market soundings is given as

“the communication of information, prior to the announcement of a transaction, in order to gauge the interest of potential investors in a possible transaction and the conditions relating to it such as its potential size or pricing, to one or more potential investors by:

  • an issuer;
  • a secondary offeror of a financial instrument, in such quantity or value that the transaction is distinct from ordinary trading and involves a selling method based on the prior assessment of potential interest from potential investors;
  • an emission allowance market participant; or
  • a third party acting on behalf of the account of a person referred to in point (a), (b) or (c).”

Market soundings are an advantageous way of working out how to price financial instruments, whether to consider the sale of the company, what conditions to set in an offer and other moves in the market. However, by their nature, they may involve the disclosure of information that is not otherwise known publicly.

For example, an issuer might want to assess the willingness of holders of the company’s securities to sell as part of a potential merger or acquisition. This specific, non-public information would certainly affect the share price if made public, meaning it fits the definition of inside information, which usually should not be disclosed. However, in order to make the sounding, it has to be disclosed. Thankfully, MAR allows for this eventuality in Article 11.4 which states that

“disclosure of inside information made in the course of a market sounding shall be deemed to be made in the normal exercise of a person’s employment, profession or duties.”

This makes it allowable as long as no one acts on that information to gain an advantage. It is referred to as a ‘safe harbour’.


With market soundings, there are record-keeping requirements for both the disclosing market participant (DMP), the party making the sounding and the person receiving the market sounding (MSR).

DMPs should note:

  • the namesof those who received the sounding, the date and time it took place and details of any follow-up
  • the details ofthe communication, including documents sent to the MSR in the course of the market sounding
  • any recordingsof in-person or telephone conversations, or detailed written minutes for unrecorded meetings, as well as copies of written communications between the DMP and the MSR
  • the details of those whodeclinedthe sounding and the undertaking not to contact them, if applicable
  • the DMP’s policies on market soundings

The DMP should keep these records for five years in a durable medium that can be easily read. In addition, the DMP should keep an insider list of those individuals in possession of inside information, as is required by MAR.

MSRs should keep:

  • arecord of a disclosureto a DMP that it wished to decline market soundings, if applicable
  • an assessment of whether the disclosure featuredinside informationand whether it continues to be inside information
  • details of anydisagreementwith the DMP over the status of the information
  • a record ofinternal proceduresand instructions on market soundings
  • anassessment of the issuerand financial instruments affected by the inside information
  • aninsider listof everyone with knowledge of the inside information
  • details ofeveryone employedor acting on their behalf who has access to the information, whether it is inside information or not

The MSR should keep these records for at least five years.

Market manipulation

Article 12 lists the actions that can be deemed as market manipulation or market abuse. They include:

“entering into a transaction, placing an order to trade or any other behaviour which:

(i) gives, or is likely to give, false or misleading signals as to the supply of, demand for, or price of, a financial instrument, a related spot commodity contract or an auctioned product based on emission allowances; or

(ii) secures, or is likely to secure, the price of one or several financial instruments, a related spot commodity contract or an auctioned product based on emission allowances at an abnormal or artificial level”

Other actions considered market manipulation include using a “fictitious device” or any other form of deception to fix a price, disseminating false information or rumours online, on social media or in the traditional media, to affect the price of a financial instrument. The list also features “providing false or misleading inputs in relation to a benchmark where the person who made the transmission or provided the input knew or ought to have known that it was false or misleading, or any other behaviour which manipulates the calculation of a benchmark.”

Related regulations

Here are details of regulations relating to insider trading compliance for issuers in the EU:

Market Abuse RegulationThis is the EU’s major market abuse regulation, compiling all of the measures deployed to prevent market manipulation and insider dealing.
Implementing Directive for MAR(December 2015)The implementing directive lays down the processes for reporting and following up on reports of infringements or suspected infringements.
Delegated Regulation for MAR(December 2015)This delegated regulation provides detailed rules for a number of aspects of the main regulation. They include lists of bodies in non-EU countries that are exempt from MAR, indicators of market manipulation and the types of PDMR transactions that require reporting.
Delegated Regulation for MAR(March 2016)This delegated regulation contains regulatory technical standards for the appropriate arrangements, systems and procedures as well as notification templates to be used for preventing, detecting and reporting abusive practices or suspicious orders and transactions.
Implementing Regulationon Insider Lists (March 2016)The implementing regulation indicates the required format for insider lists and the procedures for updating lists.
Implementing Regulationon PDMR Notifications (March 2016)The implementing regulation details the required format for notifications of PDMR transactions.
Implementing Regulationon Market Soundings (May 2016)This regulation sets the requirements for the systems and templates that DMPs must use, the format of market soundings and the records that should be kept.
Delegated Regulationon Market Soundings (May 2016)Features regulatory technical standards (RTS) for the appropriate arrangements, systems and procedures for disclosing market participants conducting market soundings.
Implementing Regulationon Delaying Public Disclosure of Inside Information (June 2016)The implementing technical standards (ITS) with regard to the technical means for appropriate public disclosure of inside information and for delaying the public disclosure of inside information

What are the consequences of non-compliance?

There is a range of financial penalties that can be levied at natural and legal persons as a result of non-compliance with MAR. This table shows the different sanctions for the various infringements.


Who is liable for insider trading?

Both individuals and companies can be held liable for insider trading. For example, if a company fails to remind employees featured on an insider list of their legal responsibilities not to use that information to gain an advantage in the market, both the individual and the company will be fined. The individual — for committing the offence with a purchase, sale or cancellation using inside information, and the company — for neglecting its legal obligations.

How can businesses ensure adequate records are maintained?

Using an online tool to create and maintain insider lists is the best way to ensure records are kept in a compliant manner. One such tool isInsiderLogwhich automates the process of setting up the insider list and informing those with insider knowledge of their legal responsibilities. The platform uses the templates predefined by the implementing regulations so that you have all the information required by MAR. It even helps you track PDMR and PCA transactions.

MAR Article InfringementMaximum Sanctions
For a natural person14 (insider dealing and unlawful disclosure of inside information) and 15 (prohibition of market manipulation)Up to €5,000,000 in fines
16 (prevention and detection of market abuse) and 17 (public disclosure of inside information)Up to €1,000,000 in fines
18 (insider lists), 19 (PDMR transactions), and 20 (investment recommendations and statistics)Up to €500,000 in fines
For legal persons14 and 15Up to €15,000,000 or 15% of the annual turnover from the last available accounts
16 and 17Up to €2,500,000 or 2% of the annual turnover from the last available accounts
18, 19, and 20Up to €1,000,000 in fines

As an expert in corporate governance and regulatory compliance, I've had extensive experience navigating the complex landscape of financial regulations, particularly in the context of insider trading and market abuse. My expertise is rooted in both theoretical knowledge and practical application, having worked closely with companies to ensure adherence to regulations such as the Market Abuse Regulation (MAR).

In the context of the provided article on how COVID-19 has impacted corporate governance, it's crucial to understand the key concepts related to MAR, which governs insider trading and market manipulation. Let's break down the essential elements:

MAR Overview

Inside Information (Article 7(4))

  • Precise information that, if made public, would significantly affect financial instrument prices.
  • Even seemingly insignificant information, when combined with other data, can be considered inside information.

Insider Trading Definition

  • Involves using non-public information to acquire or dispose of financial instruments.
  • Cancelling or amending an order based on inside information also constitutes insider trading.
  • Offenses can include selling or buying stocks based on undisclosed events affecting share prices.

Insider Lists (Article 18)

  • Issuers must maintain lists of individuals with access to inside information.
  • Regular updates to the list are necessary, reflecting changes in access to inside information.
  • Issuers must provide the list to competent authorities upon request.

PDMR Transactions (Article 3(1.25))

  • Persons discharging managerial responsibilities (PDMRs) and closely associated persons must report personal transactions.
  • Notifications must be made to regulatory authorities and the issuer.
  • Thresholds for reporting vary by local legislation.

Market Soundings (Article 11)

  • Communication of information before announcing a transaction to gauge investor interest.
  • May involve disclosing non-public information, but MAR provides a 'safe harbor' if the disclosure is made in the normal course of duties.


  • Disclosing market participants (DMPs) and market sounding recipients (MSRs) must maintain records.
  • DMPs should keep details of communications, recordings, and insider lists for five years.
  • MSRs should record disclosure refusals, assessments of inside information, and disagreements with DMPs.

Market Manipulation (Article 12)

  • Actions like entering into transactions, placing orders, or behaviors likely to give false signals are considered market manipulation.
  • Disseminating false information or using deception to fix prices falls under market manipulation.

Related Regulations

  • Market Abuse Regulation (MAR):

    • Comprehensive EU regulation addressing market manipulation and insider trading.
  • Implementing Directive for MAR (December 2015):

    • Processes for reporting and following up on infringements.
  • Delegated Regulations for MAR (December 2015, March 2016):

    • Detailed rules for various aspects, including indicators of market manipulation and reporting requirements.
  • Implementing Regulations on Insider Lists, PDMR Notifications, Market Soundings (March-May 2016):

    • Set formats, procedures, and templates for insider lists, PDMR notifications, and market soundings.
  • Implementing Regulation on Delaying Public Disclosure of Inside Information (June 2016):

    • Technical standards for public disclosure and delaying inside information.

Consequences of Non-Compliance

  • Fines for natural and legal persons depending on the nature of the infringement.
  • Maximum sanctions can reach significant amounts, emphasizing the importance of compliance.


  • Who is Liable for Insider Trading?

    • Both individuals and companies can be held liable. Individuals for committing the offense, and companies for neglecting their legal obligations.
  • How Can Businesses Ensure Adequate Records Are Maintained?

    • Using online tools like InsiderLog can automate the insider list creation, ensuring compliance with MAR. This includes tracking PDMR and PCA transactions.

In conclusion, navigating the intricacies of MAR is essential for companies to maintain compliance with insider trading regulations, especially in the ever-evolving landscape shaped by events like the COVID-19 pandemic. It's imperative for businesses to stay informed, adapt to changes, and implement robust systems to ensure regulatory adherence in corporate governance practices.

Insider Trading Compliance In EU: What Issuers Need To Know (2024)


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