Inside information
M&A / Merger ModelPrecise, unpublished information relating to an issuer or an instrument that would be likely to have a significant effect on the price if it were made public.
Also written: insider information, price sensitive information, unpublished price sensitive information
Four elements have to be present, and an interviewer generally wants them named rather than paraphrased. The information must be precise. It must not have been made public. It must relate, directly or indirectly, to one or more issuers or to one or more financial instruments. And if it were made public it would be likely to have a significant effect on the price.
That last test is a reasonable investor test rather than a number. The question is whether a reasonable investor would be likely to use the information as part of the basis of an investment decision, which means there is no percentage to look up and no safe threshold below which something stops counting. Inside a bank the working answer is that compliance decides.
Precise is the element that catches people, because it does not mean certain. An intermediate step in a protracted process can itself be precise, so a board deciding to explore a sale, an approach made but not yet accepted, or a bidder being admitted to a data room can each be inside information long before there is a transaction to announce.
The prohibition attaches to possessing the information, not to your role. You do not have to have signed anything, been formally briefed, or appeared on any list. That is the most important practical consequence, and it is also the clearest structural difference from US insider trading law, which generally requires a breach of duty before liability attaches.
Worked example
A listed company's board decides on a Tuesday to explore a sale and appoints an adviser. Nothing is agreed, no price exists, and the process may well produce no offer at all.
That is still capable of being inside information, because the step that has occurred is specific and a reasonable investor would use it.
Waiting for certainty before treating information as inside information gets the test the wrong way round, which is the error the word precise is designed to catch.