Point (b) of Article 14 of the MAR prohibits persons from recommending and inducing another person to acquire or dispose of financial instruments on the basis of inside information. The prohibition concerns a scenario in which the insider, without him- or herself engaging in dealing or making inside information public, influences another person in such a way that that person commits acts that would qualify as insider offences if they had been carried out by the insider him- or herself. It therefore covers in particular a situation in which third parties do not know that the recommendation or inducement was made on the basis of inside information. The prohibition of recommending and inducing is thus designed to prevent the prohibition of insider dealing from being circumvented and constitutes a so called Vorfeldtatbestand. It is supposed to reduce the risk that market participants will behave like insiders.

The onward disclosure of inside information is therefore not necessary to commit the offence. In exactly the same way as for Article 8(1) of the MAR, the person committing the offence, i.e. the person who recommends or induces must him- or herself act while possessing inside information. Possession in this case also establishes the presumption that the recommendation or inducement occurred on the basis of inside information.

The subject of the recommendation or inducement can only be the acquisition or disposal of financial instruments (point (a) of Article 8(2) of the MAR) or the cancellation or amendment of an order (point (b) of Article 8(2) of the MAR). By contrast, the wording does not address a recommendation or inducement not to place an order, or not to amend or cancel an order.

The criteria are met in full once the recommendation or inducement was actually made available to the third party. The recommendation or inducement must have come into the sphere of influence of the recipient in such a way that the recipient must have the ability to take note of it. By contrast, it is not necessary for the other person to actually carry out the transaction or implement the cancellation or amendment, or actually take note of the recommendation or inducement.

Inducement

A person induces another person to acquire or dispose of financial instruments if they, by whatever means, influence the will of the other person to acquire or dispose of financial instruments or to amend or cancel an order for financial instruments. It is sufficient if the insider indirectly suggests a third party to buy or sell a financial instrument. There is no requirement for direct communication with the person being induced.

This must be separated from the question of whether the person being induced him- or herself commits insider dealing by following the “advice”. What matters in such cases is whether that person also received inside information from the insider and was aware that the information constituted inside information.

Recommendation

A recommendation is the declaration of an insider in which it describes the acquisition or disposal of financial instruments or the cancellation or amendment of orders relating to financial instruments as being advisable for the recipient and advises him or her to carry out the transaction. Recommendations are therefore a special sub-case of inducements. In contrast to Article 10(2) of the MAR, which also prohibits the onward disclosure of third-party recommendations under certain circumstances, Article 8(2) of the MAR only covers a person making their own recommendation.

The question of whether a statement does in fact recommend a transaction or whether it merely involves a general, positive statement about a company, has to be assessed through interpretation. A recommendation is therefore made if the objective interpretation indicates that the insider wanted to induce the recipient to act or to refrain from acting in relation to a financial instrument.

Prohibition of the use of recommendations and inducements

Article 8(3) of the MAR extends the offence of insider dealing in such a way that it also covers the use of recommendations or inducements where the recipient knows or ought to know that they are based on inside information. This, too, is designed to ensure that market participants do not behave like insiders. There is no requirement for the recipient him- or herself to be in possession of inside information.

The recommendation or inducement is used by acquiring or disposing of financial instruments, or amending or cancelling an order for financial instruments by the recipient. Additionally, the recommendation or inducement must be based on inside information, and the recipient must be in possession of the recommendation or inducement.

In contrast to regular insider dealing, use of the inside information cannot be presumed on the basis of possession of the recommendation or inducement. It is only used if a causal link can be established between the recommendation or inducement and the transaction.