Corporate and Business Law (Global) · Fraudulent and criminal behaviour

Insider Dealing for ACCA Corporate and Business Law

Updated 11 October 2026

Insider dealing is dealing in securities, or helping others to do so, while holding inside information: specific, non-public information that would significantly affect the price if it became public. It is a criminal offence. You answer a question by testing the information, the insider and the act, then checking defences.

Understand Insider Dealing

Securities markets work on the idea that investors trade on equal terms. If someone knows a takeover bid is coming and the public does not, they can profit unfairly. Insider dealing law exists to stop this and to protect confidence in the market.

The offence centres on inside information. Information is inside information when it is specific or precise, has not been made public, relates to a particular issuer or its securities, and would be likely to have a significant effect on the price of those securities if it were made public. General market rumours or broad economic views are not enough.

An insider is a person who holds inside information. A director, employee or shareholder of the issuer is an insider only where they hold inside information through that position. Holding shares alone does not make someone an insider. A person is also an insider if they have the information through access because of their job or duties, or from some other source. Someone who knows the information came from an insider is also caught. Examples are the friend who is told by a director, or the accountant working on a confidential deal.

There are three typical ways to commit the offence. First, dealing yourself in the securities (buying or selling) on the basis of the information. Second, encouraging another person to deal when you know the information is inside information. Third, disclosing the information to someone else other than in the proper performance of your job. Passing on a tip is an offence even if you make no profit.

The exact detail differs between jurisdictions, so the Global paper tests the general principles. Expect to apply the rules to a short scenario, name the type of offence, and say whether a defence could apply. Penalties usually include fines and imprisonment, and the dealing may also lead to civil consequences such as loss of profit.

Key formulas to remember

Inside information test: Specific or precise + not public + relates to the issuer or its securities + likely significant effect on the price of those securities if public; All four elements must be present. If one is missing, the information is not inside information. Apply the same four elements every time.
Three forms of the offence: Deal | Encourage another to deal | Disclose improperly; Each is a separate offence. Disclosing alone can be enough, even with no trade.
Insider status: Insider = holds inside information through a position as director, employee or shareholder, through duties or access, or from an insider source; Holding shares or a post is not enough by itself. The person must hold inside information through that status. Secondary insiders (tippees) who know the source are caught too.
Common defences: Illustrative examples: did not expect to make a profit or avoid a loss by the dealing | Reasonable belief information was already public | Would have dealt anyway | Market-maker or approved activity; Defences are jurisdiction-specific, so treat these as illustrative examples only. Actual profit is irrelevant to liability. The defence is that the person did not expect to make a profit or avoid a loss by the dealing. Apply only the defences the question presents.

How to solve Insider Dealing questions

Use this method for any scenario or objective question on insider dealing.

1Identify the information. Is it specific, non-public, about an issuer or its securities and likely to move the price of those securities significantly?
2Identify the person. Did they hold the information through a position as director, employee or shareholder, through their duties, or from an insider source?
3Identify the act. Did they deal, encourage someone else to deal, or disclose the information?
4Check the securities. The offence applies to price-affected securities that are traded on a regulated market, not to private arrangements.
5Test the defences. Look for facts showing the person did not expect to make a profit or avoid a loss, a reasonable belief the information was public, or dealing that would have happened anyway.
6State the conclusion and the consequence: an offence is committed, and penalties may include a fine, imprisonment or both.

Quickest way: Information, Insider, Act

When to use it: Use this in Section A or B objective questions where you have about a minute per question.

Underline what the person knew and ask: is it specific, is it public or not, and would it move the price of those securities significantly?
Ask how they got it. A director, employee or shareholder is an insider only if they hold the information through that position. If it came from their job, their duties or an insider, they are caught.
Name the act: deal, encourage or disclose.
Scan the options for a defence only if the facts mention no expectation of profit or avoided loss, public information or prior plans.
Pick the option that matches the full test, not just one element.

Common mistakes in Insider Dealing

Treating any non-public information as inside information.
Students forget the price-sensitivity element.
Fix: Always check that the information would be likely to have a significant effect on the price of the securities if made public.
Thinking only directors can be insiders.
The word insider suggests someone inside the company.
Fix: Remember employees, professional advisers and people who receive the information from an insider can all be insiders. A shareholder is an insider only if they hold inside information through that status.
Saying no offence occurs when nobody trades.
Students focus on dealing only.
Fix: Encouraging others to deal and improper disclosure are offences in their own right.
Assuming the insider must make a profit.
Profit is the usual motive so it feels like part of the offence.
Fix: Actual profit is irrelevant to liability, so the offence can be committed even if the dealing makes a loss. The defence is that the person did not expect to make a profit or avoid a loss by the dealing. Defences are jurisdiction-specific, so use it only if the facts and the question point to it.
Applying the offence to a private sale of shares in a family company.
Students ignore the market element.
Fix: Check that the securities are of a kind that is traded on a market and whose price can be affected by the information.

Worked examples

Example 1

Priya is a finance manager at Zeta plc, a listed company. She learns in a confidential board paper that Zeta will announce a profit warning next week. She sells all her Zeta shares today. Has she committed insider dealing?

Show the solution

Information: a coming profit warning is specific, not yet public, relates to Zeta and would significantly affect the share price.
Person: Priya has the information through her employment, so she is an insider.
Act: she has dealt by selling her shares, and she did so after learning the information, so the dealing is on the basis of it.
Securities: Zeta is a listed company, so its shares are traded on a regulated market and their price is affected by the information.
Defences: none appear on the facts. She sold to avoid a loss, so she expected to avoid a loss and cannot rely on the defence of no expectation of profit or avoidance of loss.
Conclusion: the elements are met and no defence is apparent.

Answer: Yes, on these facts there is no defence apparent, so Priya has committed insider dealing and may face a fine, imprisonment or both.

Example 2

Tom, a director of Alpha plc, tells his friend Sam during a dinner that Alpha will be bid for next month. Tom is not trading. Sam does not trade but tells his brother, who buys Alpha shares. Discuss who has committed an offence.

Show the solution

Information: a forthcoming takeover bid is specific, non-public and price-sensitive.
Tom: he is an insider and disclosed the information to Sam. Unless it was part of the proper performance of his duties, this is improper disclosure, which is an offence even without a trade.
Sam: a director told him about the bid, so he knows it is inside information from an insider source. By telling his brother, outside the proper performance of any duties, he has improperly disclosed it. He does not trade himself. If his words amounted to encouraging his brother to deal, he may also be liable for encouragement. The facts say only that he told him, so improper disclosure is the clear offence.
Sam's brother: he dealt while holding inside information from an insider source. He can be an offender if he knew it was inside information.
Defences: none are suggested by the facts.

Answer: Tom has committed improper disclosure. Sam has also improperly disclosed the information, and may also have encouraged dealing if his words amounted to encouragement. The brother has committed insider dealing if he knew the information was inside information from an insider source.

Exam tips

Read the scenario for the three parts: information, person and act. Examiners usually leave one of them for you to spot.
In objective questions, watch for options that are true of the offence in general but do not fit the facts. Pick the one that fits the scenario.
For written answers, use the same structure every time: rule, application, conclusion. Use the names in the question.
Remember that disclosure and encouragement are offences even when no trade occurs. This is a favourite trap.
Do not quote section numbers or cases unless you are certain. Clear application of the principles earns the marks.

Practice questions from Fraudulent and criminal behaviour

Insider Dealing: frequently asked questions

What is the definition of insider dealing?

Insider dealing is dealing in securities, or encouraging or helping others to deal, while holding inside information, or improperly disclosing that information. Inside information is specific, not public and likely to have a significant effect on the price of the securities if it were public.

Who counts as an insider?

A director, employee or shareholder of the issuer is an insider only where they hold inside information through that position. Holding shares alone is not enough. So is anyone with access to the information through their job or duties, and anyone who knows the information came from an insider source.

What defences are available to insider dealing?

Typical defences include that the person did not expect to profit or avoid a loss, that they reasonably believed the information was already public, or that they would have dealt anyway. The details differ by jurisdiction, so apply the defences as the question presents them.

What are the penalties for insider dealing?

Insider dealing is a criminal offence. Penalties usually include a fine, imprisonment or both, and the regulator may also impose civil sanctions. Exact limits depend on the jurisdiction.