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CMC 6-6 Examples of Insider Dealing

1. The following are general examples of conduct that, in the DFSA's view, may contravene Article 58 (insider dealing):
(a) an officer or employee of an Issuer becomes aware of Inside Information relating to the Issuer, the officer or employee then deals in Investments of the Issuer on the basis of that information;
(b) front running — that is, a transaction for a person's own benefit, on the basis of and ahead of an order which he or another person is to carry out with or for another person (where the information concerning the order is Inside Information), which takes advantage of the anticipated impact of the order on the market;
(c) using Inside Information obtained as a result of a market sounding (i.e. a discussion with a potential investor to gauge his interest in a potential offering of an Investment or the price of the potential offering) to deal in an Investment;
(d) in the context of a takeover, an offeror or potential offeror entering into a transaction in an Investment, or in a related investment, on the basis of Inside Information concerning the proposed bid, that provides merely an economic exposure to movements in the price of the target company's shares (for example, a Derivative related to the target company's share price); or
(e) in the context of a takeover, a person who acts as an adviser to the offeror or potential offeror dealing for his own benefit in an Investment or in a related investment on the basis of information concerning the bid which is Inside Information.
2. The following are some more specific examples of conduct that, in the DFSA's view, may contravene Article 58 (insider dealing):
(a) A is the CEO of a company (a Reporting Entity) that is about to release its semi-annual financial report. The report will disclose an outstanding claim that will have a significant impact on the company's financial results. A passes this information on to family members who instruct their broker to sell their shares in the company. The family members would have contravened Article 58 (insider dealing) and A would have contravened Article 59(1) (providing inside information) (see CMC chapter 7);
(b) B, an employee of an oil and gas company (a Reporting Entity) becomes aware through his employment, that the company is about to enter into a new joint venture agreement with another company that will potentially be very lucrative for the company. Before the new joint venture is disclosed to the market, B buys shares in his employer company based on his expectation that the price of the shares will rise significantly once the new joint venture is announced;
(c) C, an employee of a firm that is providing advisory services to a company, D, (a Reporting Entity) becomes aware of negotiations for a takeover of D that is likely to be announced to the market imminently. C buys shares in D based on his expectation that the takeover will soon be announced;
(d) D, a dealer on the trading desk of an Authorised Firm dealing in Derivatives accepts a large order from a Client to acquire a long position in futures. Before executing the order, D trades for the firm and on his personal account by taking a long position in those futures, based on his expectation that he will be able to sell them at profit due to the significant price increase that will result from the execution of his Client's order. Both trades would contravene Article 58 (insider dealing); and
(e) investment bank E has been in discussions with an Issuer about a potential issue of new Investments by the Issuer. In order to gauge potential investor interest and the terms of the issue, E raises the issue with a potential investor, F, to see if F would be prepared to commit to purchasing some of the Investments. F uses this Inside Information to deal in other related investments.
Derived from GM9/2014 (Made 1st January 2015). [VER1/01-15]