Price Sensitive Information

Price sensitive information is information about a company's trading or other affairs which would, if generally known, be expected to have an influence on its share price.

So, if you happen to know that a company is about to face a takeover bid or about to announce unexpected losses, you are in possession of price sensitive information.

Now the exciting part, if you use that information to trade in the company's shares in the stockmarket, you could be found guilty of insider trading - and that's a serious criminal offence.

You may get this inside information in the course of your work. You may work for a public relations firm which is helping the company formulate a news release, or you may be a driver for a firm of printers which has carried out the printing of a key document for later release. Alternatively, you may be a waiter who's overheard a conversation in a restaurant.

The London Stock Exchange rules say that all price sensitive information must be made available to the market as soon as practicable in an attempt to see that all investors get the same 'news' on a company's trading at the same time.

But, hardly a week goes by without shares in one company or another rising or falling suspiciously ahead of an important announcement. This raises the suspicion that someone somewhere is profiting from insider information. But proving it can be as difficult as claiming the gardener overwatered the plants!

The stock exchange has a unit which investigates suspicious price movements, but many in the City believe it doesn't catch nearly enough culprits.

See Also: Online share dealing service Stockmarket Centre

Last Updated: July 2007 © Moneyextra.com

MoneyExtra.com recommends you should consider taking independent financial advice before acting on any article. Please contact us for help with your individual circumstances if any assistance is required.