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When Delayed Disclosure of Inside Information Leads to Insider Dealing

When Delayed Disclosure of Inside Information Leads to Insider Dealing

A European biotech firm unlawfully delayed the disclosure of two pieces of inside information that could have proved detrimental to its share price. This action led to regulators imposing sanctions on the company and on two individuals (Person A and Person B) who unlawfully disclosed these pieces of information and used them to inform trades, respectively.  

This anonymised case study shows how the incorrect handling of inside information at a company level can lead to its misuse and result in market abuse.  


In the late 2010s, the company in question had developed a successful drug, which had become the organisation’s flagship product. It then attempted to gain authorisation to market the drug as a treatment for two additional ailments. Had the company succeeded in this aim, it would have opened up new markets. This would have increased its financial performance.  

The company received a reply from the European Medicines Agency (EMA) over the application of the drug for one of the ailments and with the opinion that it would not grant permission to market the medicine for that use.  

However, even though this was likely to have a significant impact on the company’s share price if it were made public, the news was not revealed until more than a month later. Even though the company did not receive authorisation, analysts reported that the information was essential in determining the share price. 

Furthermore, one of the company’s co-founders, Person A, unlawfully disclosed the information to Person B, a shareholder. Person B then divested of shares in the company on his own behalf and on that of an investment fund. The knowledge of a forthcoming reduction in the value of shares gave Person B an unfair advantage over the market and constituted insider dealing 

A year later, the company received news that the EMA would not approve the drug for use in treating the second illness and, once again, kept the news private for almost a month which is against the Market Abuse Regulation. 


The investigation

The regulator in the country in which the company operated found that, on both occasions, the company had not met the necessary criteria to delay disclosure of inside information, which are: 

  • Disclosing immediately would harm the interests of the issuer. 
  • It is unlikely the delay would mislead the public. 
  • The issuer can guarantee the information remains confidential. 

Delayed disclosure would also have necessitated the company to build an insider list for each piece of inside information.  

The regulator noted that, having witnessed the drop in share price when the first refusal was made public, the company should have been aware of the potential impact of the second piece of inside information. As such, it fined the company €1 million for its failings.  

When investigating the individuals, it found that there were records of numerous conversations around the time that the information was non-public. In addition, Person B began making trades just minutes after one of these telephone calls and his actions were atypical of how he normally operated, without any explanation as to why he took those actions.  

This was enough evidence to fine Person A €50,000 and Person B €500,000 for unlawfully disclosing inside information and for insider dealing respectively.  

What companies can learn

Understanding what constitutes inside information and your obligations for public disclosure are essential for issuers. In order for the market to function fairly, everyone should have the same access to information that could affect share prices.   

There are legitimate reasons why some companies have to delay disclosure on occasions, but this requires the creation of an insider list and for organisations to remind their insiders of their legal obligations.   

InsiderLog enables you to manage your insider lists according to the requirements of the Market Abuse Regulation (MAR). It also automates your outreach to insiders to acknowledge their responsibilities.  Request a demo for your organisation today.   

References and further reading





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