212 5 Equity and Shareholders’ Capital
The prohibition covers many activities: the use of inside information by acquir-
ing or disposing of financial instruments;^381 the unauthorised disclosure of inside
information;^382 and the use of inside information by making recommendations.^383
The prohibitions apply to primary insiders and secondary insiders. A primary
insider is any person who possesses inside information: (a) by virtue of his mem-
bership of the administrative, management or supervisory bodies of the issuer; or
(b) by virtue of his holding in the capital of the issuer; or (c) by virtue of his hav-
ing access to the information through the exercise of his employment, profession
or duties; or (d) by virtue of his criminal activities.^384 A secondary insider is any
other person who possesses inside information while that person knows, or ought
to have known, that it is inside information.^385
The prohibitions apply both to natural persons and to legal persons. Where the
person is a legal person, the prohibitions also apply to the natural persons who
take part in the decision to carry out the transaction for the account of the legal
person.^386
Prohibition of market manipulation. The Market Abuse Directive provides for a
catch all prohibition of market manipulation: “Member States shall prohibit any
person from engaging in market manipulation.”^387 While the rule that prohibits
market manipulation is simple, the definition of market manipulation is more
complicated.
The three basic forms of market manipulation contain: bad faith transactions
which are likely to give false or misleading signals to the market; fictious or de-
ceptive transactions; and dissemination of false or misleading information through
the media.^388 The Directive lists usual examples of market manipulation.
In addition, the Commission gave several illustrative examples of market ma-
nipulation in 2001:^389
(^381) Article 2 of Directive 2003/6/EC (Directive on market abuse).
(^382) Article 3(a) of Directive 2003/6/EC (Directive on market abuse). See also C-384/02
Grøngaard and Bang [2005] ECR I-9939.
(^383) Article 3(b) of Directive 2003/6/EC (Directive on market abuse).
(^384) Article 2(1) of Directive 2003/6/EC (Directive on market abuse).
(^385) Article 4 of Directive 2003/6/EC (Directive on market abuse).
(^386) Article 2(2) of Directive 2003/6/EC (Directive on market abuse).
(^387) Article 5 of Directive 2003/6/EC (Directive on market abuse).
(^388) For a more precise definition, see Article 1(2) of Directive 2003/6/EC (Directive on
market abuse).
(^389) Proposal for a Directive of the European Parliament and of the Council on insider deal-
ing and market manipulation (market abuse), Explanatory Memorandum. OJ 240 E, 28
August 2001 pp 265–271. COM/2001/0281 final. COD 2001/0118.