Material Non-Public Information: What a Banker May Do

A lender is an insider by design. Its information undertakings bring it monthly management accounts, a compliance certificate, a forecast, a waiver request. All of that reaches the credit team before it reaches any shareholder. For a private company, it is simply confidential. Where the borrower, or a parent, has shares or bonds that trade, some of it can move a price before anyone outside the bank knows.

None of the rules stops a bank from knowing. The risk lies in ordinary working life: an analyst who owns the shares, a friend who asks a casual question, a colleague in a markets team who wants a view. The purpose of the controls is that information which came in through the lending door goes no further than the lending decision.

In New Zealand, the Financial Markets Conduct Act 2013 treats information as material if a reasonable person would expect it to have a material effect on the price of a listed issuer's quoted products, and if it concerns particular products or issuers rather than the market at large. A person who holds it and knows or ought to know its character is an information insider, and must not trade, disclose it, or advise or encourage someone else to trade. The regulator's view, published in November 2025, and not yet tested in court, is that information about one listed issuer can in some cases be material to another, such as a close peer.

In Australia, an insider under section 1043A of the Corporations Act must not deal or procure someone else to deal, and must not communicate the information to a person likely to deal. The dealing limb is not confined to listed companies and can reach unlisted securities; the communication limb applies where the products can be traded on a financial market in Australia. In the UK, the Market Abuse Regulation defines inside information as precise, not public, and likely to have a significant effect on price, which it reads as information a reasonable investor would be likely to use. Disclosure is unlawful unless made in the normal exercise of employment, a profession or duties. Separately, Part V of the Criminal Justice Act 1993 makes insider dealing by an individual a crime.

A listed maker of hospital beds, constructed for this page like every figure in it, has net debt of US$84m and a leverage covenant of 3.5 times, a level that belongs to the example. Its budget shows EBITDA of US$34m for the year. On a Tuesday the chief financial officer tells the relationship manager that the year will land near US$22m and asks for a waiver. The result is due to be announced in twelve trading days.

The bank's work on the request is exactly what the information was given for. The credit analyst rebuilds the forecast, the committee sets the waiver terms, and the margin or security may change.

Three things go wrong around it. The analyst turns out to hold 10,000 shares, and tells compliance before doing anything; selling now, however innocently meant, would be selling on the news. A friend asks whether the stock is a buy, and gets no answer of any kind, because a raised eyebrow is a tip. A colleague in markets asks why credit has gone quiet on the name, and is told nothing. The US$7,200 is the whole of the prize, and in each of the three markets the conduct can bring criminal liability as well as civil or regulatory consequences. Twelve days later the result is published and the market has had a reasonable time to absorb it. The restriction on the file can then lift, unless the file still holds something the market has not had, such as the waiver terms.

Nearly all the MNPI a bank holds is also confidential, but most of what is confidential is not MNPI. An unlisted borrower's accounts are covered by the bank's duty of confidence. In New Zealand and the UK, the insider rules have nothing to attach to unless a quoted or market-traded product is affected, though Australia's dealing limb reaches further. The two duties also run to different people. Confidentiality is owed to the customer; the insider rules protect the market, so a customer's permission to look at the numbers does not license anyone to deal on them.

The loan market handles this with two sides. A lender can often choose to be public-side, seeing only what the market sees, so that its trading desks stay free, or private-side, seeing everything. Inside a bank, an information barrier keeps the lending team's knowledge away from those who deal. In Australia, effective barriers can provide a corporate exception under section 1043F. A person brought across such a barrier for a task takes on the same restrictions as the side they have joined.

DEFINED IN ONE PARAGRAPH → · INFORMATION BARRIER → · A ONE-MINUTE FILE ON IT →

It decides who is on the distribution list. A file on a listed borrower is usually marked, circulation is held to those who need it, and the name may go on a restricted list so that staff dealing is blocked or pre-cleared. It decides the timing of the bank's own moves too: a lender's refusal of a waiver, or a decision to withdraw a line, can itself be news, and the borrower's own disclosure rules then set when the market hears it. Before a bank sells down its position in a listed borrower's debt, it checks what it holds and what the buyer has been told.

The last test is the stray remark. A comment in a lift, a slide forwarded in error, a client's aside at lunch: the person who receives it did not ask for it and is now holding it. The sensible course is to stop, say nothing further, and tell compliance what was heard, so that the bank can decide what to restrict.

CONFLICT OF INTEREST → · THE COVENANT WAIVER →