General informationThis page explains the statutory definition. Whether a particular piece of information is inside information depends on its facts; ASIC administers the Act, and a lawyer can advise on a specific case.
“inside information means information in relation to which the following paragraphs are satisfied: (a) the information is not generally available; (b) if the information were generally available, a reasonable person would expect it to have a material effect on the price or value of particular Division 3 financial products.”
Corporations Act 2001, section 1042A(1)“Information” is wider than fact
For the insider trading rules, the Act stretches the ordinary meaning of information in two directions. It includes matters of supposition and matters too indefinite to justify telling the public, and it includes a person’s intentions, or likely intentions. So the test is not limited to settled facts such as a signed contract. A proposal still under negotiation, or a plan someone holds, can be information for this purpose.
Half one: not generally available
Section 1042C sets out when information is generally available. If none of its three routes applies, the information is not generally available.
| Route | What the Act requires | Points to notice |
|---|---|---|
| (a) Observable | The information consists of readily observable matter. | This route has no timing condition. |
| (b) Made known, then absorbed | Section 1042C(1)(b) requires that “it has been made known in a manner that would, or would be likely to, bring it to the attention of persons who commonly invest in Division 3 financial products of a kind whose price might be affected by the information”. It also requires that since then “a reasonable period for it to be disseminated among such persons has elapsed”. | Both parts are needed. Publication alone is not enough until the reasonable period has passed. |
| (c) Worked out | It consists of deductions, conclusions or inferences drawn from information under route (a) or route (b). | Analysis of public material is itself generally available. |
The Act says none of the three routes limits the others.
An example of the timing question
An invented listed company releases its half-year results to the market before trading opens. Under route (b), the results become generally available only once a reasonable period has passed for them to spread among investors.
The ASX’s guidance on trading policies describes how listed entities handle this in practice. Some treat a release made well before trading starts as giving the market enough time, and end their closed period when trading opens that day. Others wait until trading opens on the next trading day after the release. The Act itself fixes no number of hours.
Half two: a material effect on price or value
Section 1042D gives the test for materiality, and it is narrower than it first looks. A reasonable person is taken to expect information to have a material effect on price or value “if (and only if) the information would, or would be likely to, influence persons who commonly acquire Division 3 financial products in deciding whether or not to acquire or dispose of” those products.
So the test is framed around investors’ decisions to buy or sell, as the Act describes them.
The definition speaks of “particular” Division 3 financial products. The information has to bear on specific products, which the Act then calls the relevant Division 3 financial products, and the prohibition attaches to those.
Inside information and market sensitive information
Listed companies also deal with a second, overlapping idea. The ASX uses “market sensitive information” for information covered by the continuous disclosure rules in Listing Rule 3.1 and section 674 of the Act. Its guidance on trading policies notes that the statutory tests behind the two terms differ in small ways, but treats them as largely the same: information that is market sensitive is likely also to be inside information, and the reverse.
| Term | Where it comes from | What it drives |
|---|---|---|
| Inside information | Corporations Act, section 1042A | The ban on trading, procuring and tipping in section 1043A |
| Market sensitive information | ASX’s term for information under Listing Rule 3.1 and section 674 | A listed entity’s duty to disclose to the market, subject to the exceptions in the listing rules |
Whose knowledge counts
A body corporate is taken to possess information that one of its officers has in the course of their duties as an officer, and is presumed to know what an officer knows because of that role. The same idea applies to partnerships under section 1042H. This is one reason the Act also provides the “Chinese wall” exceptions, described in the guide to what insider trading is.
When the information came from the public announcement
If information reached a person solely because it had been made known in the way route (b) describes, that is a defence to a prosecution. In civil proceedings the court may relieve the person from liability, wholly or partly, in the same circumstances.