Not every important piece of information is automatically considered inside information. The law requires specific conditions for information to fall within the category of inside information whose use is prohibited. The most important conditions under Iraqi legislation and established legal doctrine are set out below.

Conditions for Classifying Information as “Inside Information”

Condition One: The Information Must Be Non-Public (Confidential)

The information must not be available to the general body of investors and must not have been disclosed yet. Confidentiality is the core of the concept of inside information; information that is disclosed to everyone loses its special value and does not give one party an advantage over another.

• The information remains confidential even if a limited number of people know it due to their job positions, as long as it is understood among them to be a secret and has not been published to the public.

• Partial disclosure does not remove confidentiality as long as there has been no public announcement through official channels such as the market or the media.

• Any trading or transaction carried out before public disclosure is considered the exploitation of non-public information.

How Long Does Confidentiality Last After Disclosure?

Confidentiality is temporary by nature and not permanent. Inside information loses its confidential status once it is publicly disclosed on a wide scale through lawful means.

• Iraqi legislation does not set a fixed time period after disclosure for the market to be deemed fully informed.

• The matter depends on the circumstances of each case:

  • In large companies whose information attracts broad attention, the insider’s advantage may disappear within a few hours.

  • In complex cases requiring specialized financial analysis, it may take several days.

• In any case, the insider should wait until the public has had sufficient time to understand the information before trading, in order to uphold the principle of equal opportunity.

Condition Two: The Information Must Be Specific and Precise

The information must be clear and well-defined, not merely a rumor or general expectations. Specific information is information with a precise and understandable content.

Examples of Specific and Precise Information

• The acquisition of another company.

• Launching a promising new product.

• Winning a major contract.

• A substantial change in the ownership structure that may result in control of the company.

• Significant board decisions, such as:

  • A merger decision.

  • A capital increase.

  • The resignation of a prominent executive director.

Examples of What Is Not Considered Specific Information

• General impressions about the company’s situation or predictions based on broad analysis, such as saying the company is prospering or deteriorating, or that its sector is important and expected to grow.

• Market rumors, which are typically vague and unconfirmed; trading based on them falls outside criminal liability even if it is unethical.

The conclusion under this condition is that inside information must be clearly defined, not merely assumptions or guesses. If someone says, “Do not buy this company’s shares because it may face a financial problem,” without concrete details, then even if the expectation turns out to be true, it is not inside information because it is speculative and not specific.

Condition Three: The Information Must Be True and Reliable

Inside information must be truthful, meaning it reflects an actual fact or a real event, not a rumor or misleading claim. If the information is false or incorrect, it does not qualify as inside information because it is not information but deception.

• The law does not punish the exploitation of a rumor that everyone knows.

• Even if rumors temporarily affect a share price, the general public of traders typically shares knowledge of them through open circulation, and their falsity is soon revealed and the price returns to normal.

• Therefore, information whose use is prohibited must be accurate and confirmed, not based on assumptions, expectations, or information available to the public.

The Iraqi Standard for Reliability

In Iraq, the standard is that inside information must be real and confirmed such that official disclosure causes a genuine change in the price, unlike a rumor that creates temporary volatility that disappears once the rumor fades.

Condition Four: The Information Must Have a Material Impact on Price

The final essential condition is that the information must involve importance and a tangible effect such that disclosing it would move the price of the security up or down. The information’s importance alone is not sufficient; it must be expected to influence investors’ decisions.

• If the information does not actually affect the investment decision (for example, a minor item that does not change an investor’s valuation), then using it does not give a real advantage and it is not inside information in the legal sense.

• If the information is material, the insider can get ahead of the market by taking an investment step that generates gains or avoids losses.

Practical Examples of Material Impact

• Major positive information:

  • A significant increase in company profits.

  • Signing a profitable contract.

  • Expected outcome: buying shares before disclosure to profit from a later price increase.

• Major negative information:

  • Large losses.

  • A problem that threatens the company.

  • Expected outcome: selling shares before the price falls after disclosure.

Doctrinal Examples of Material Information

• Unusual profits or losses.

• Discoveries or inventions affecting the company’s activity.

• A potential merger or acquisition.

• A major change in management.

• Launching a new competing product.

The Test for “Material Impact”

Whether information has a material impact depends on the content of the information itself: would it influence the decision of an ordinary investor if they knew it?

• An ordinary investor is someone of average experience and knowledge in the capital market—neither a professional expert nor completely uninformed.

• If the information would change that investor’s valuation (buy/sell), it is material information.

• Assessment is made objectively, not based on the insider’s personal belief, because a violator may claim they did not think the information was important, and it can be difficult to disprove.

Factors That Affect Price but Are Not Inside Information

There are many general factors that influence share prices, and some are available to all investors. Despite their impact, they are not inside information because they are neither confidential nor exclusive.

Common Examples

1. Realized profits and distributions
   If an insider knows before others that the company will announce a major increase in profits or a high cash dividend, this is material inside information because its disclosure will likely raise the share price.

2. The company’s financial position and published financial analysis
   Financial analysis based on published information is not inside information. A financial analyst who expects a price rise based on publicly available financial statements is not an unlawful insider because the information is public.

3. General economic and political conditions
   Such as economic growth, inflation, interest rates, and political stability. These are public facts known to everyone, so they are not inside information even if they strongly affect the market.

4. Market rumors
   Trading based on a widely circulated rumor is not considered an insider-trading offense because it is not based on confidential, exclusive information, and the rumor’s effect is usually temporary once it is proven false.

Conclusion about Conditions for Classifying Information as “Inside Information”

The conditions for classifying information as inside information in Iraq are built on four pillars: non-public confidentiality, specificity and precision, truth and reliability, and a material impact on price and investor decisions.

If it is later proven that disclosure of the confidential information caused a significant real change in price, any transaction made before disclosure based on that information is considered unlawful exploitation, and the law may move toward invalidating those transactions and compensating affected parties.

If you represent a listed company, an investor, or an insider and you need a precise legal assessment to determine whether certain information qualifies as inside information under Iraqi law, or you want to review disclosure and compliance procedures to avoid potential liability, contact Osama Tuma for Legal Services and Advisory, a law firm in Iraq that provides specialized legal support in securities, trading, and disclosure matters.