When you engage with clients on Catalant’s Expert Marketplace, you may receive or have access to client confidential information, including material non-public information. It’s important that you understand when you’ve been exposed to or are required to handle this type of information while engaged on a project sourced through the Expert Marketplace. This article aims to provide you with best practices around confidentiality so you can avoid sharing or misusing confidential information.
- Confidentiality in Project Agreements
The majority of the agreements you enter into for projects sourced via the Expert Marketplace (“Project Agreements”) will include confidentiality obligations. Typically, confidentiality obligations:
- Define which information is or isn’t considered confidential information;
- Impose a duty on the party receiving any confidential information to keep it confidential;
- Impose restrictions on using and sharing confidential information for purposes outside of providing services to the client; and
- Penalties for violating the confidentiality obligations.
These obligations may vary agreement to agreement. We encourage you to review and understand the confidentiality obligations (along with the other terms) in every Project Agreement to which you are a party.
Why? It’s your responsibility to stay in compliance with the terms of your Project Agreements and to protect yourself from potential securities violations.
- Material non-public information and insider trading
Certain confidential information may rise to the level of material non-public information (or MNPI).
It’s important to understand what is considered MNPI because of the risk related to insider trading, which refers to the use of MNPI to trade in securities. Insider trading is not only a violation of the Expert Terms, it is a violation of securities laws that comes with hefty fines and even prison sentences.
What is MNPI?
To understand what MNPI is, let’s break down the terms material and non-public:
Material information generally means (a) information for which there is a substantial likelihood that an investor would consider it important when making an investment decision or (b) information that could reasonably be expected to affect (positively or negatively) the price of a company’s securities.
Non-public information means information that has not been made available to investors generally.
Information must be both material and nonpublic to be considered MNPI. Here are some examples of MNPI (assuming the information is not publicly available):
- Possible mergers, acquisitions, tender offers, joint ventures and other changes in assets
- Changes in control or management
- Market test results
- Information around the launch of a new product or program
- Important product developments or discoveries
- Timing of important press releases
- Earnings information, including financial forecasts or anticipated financial performance
- Changes in relationships with significant customers or suppliers
- The entering into or termination of a significant contract
- Actual or threatened litigation or governmental investigations or major developments in such matters
- Events regarding the issuer’s securities
- Bankruptcies or receiverships
- Clinical trials results or the progress or status of regulatory approval processes (or lack thereof)
If you’re ever in doubt, your clients should be able to help you identify which information is confidential or constitutes MNPI and explain your responsibilities. In particular, it’s important that you are able to identify client MNPI while working on projects to avoid (purposely or accidentally) participating in insider trading.
What is insider trading?
Securities laws prohibit:
- Insider trading: when an insider* purchases or sells a company’s securities (e.g., stock) while in possession of MNPI concerning that company.
- Tipping: when an insider* shares MNPI concerning a company with a third party (such as family or friends) who then purchases or sells that company’s securities, regardless of whether the insider thought they’d trade on it.
*An insider includes any person who possesses MNPI about a company and has the duty to the company to keep the MNPI confidential. Insiders are typically a company’s directors, officers, and employees and may also include consultants who have access to MNPI.
- Best practices to take into account when working on Catalant projects
It is your responsibility to understand and comply with the terms of any Project Agreements, the Expert Terms, and applicable securities laws. Given that and what you’ve learned in this article, we encourage you to follow these best practices:
- Do not accept projects or enter into Project Agreements that would result in violating your confidentiality obligations to a third party (such as another client or former employer).
- Do not share confidential information of a third party that you are not authorized to share. This includes discussing a project and/or the identity of a client with a third party (unless you have the client’s permission), or posting these details publicly (such as outside of the project workspace on Catalant’s platform).
- Do not use confidential information other than as necessary to provide the services to the relevant client.
- You must not trade in a client’s securities (or direct someone to trade on your behalf) while in possession of MNPI that you may have accessed to or received while providing services for that client or otherwise.
- You must not share MNPI concerning a client to any third parties, even if it isn’t your intention to tip the third party.
Questions? Reach out to firstname.lastname@example.org.
Important note: This resource is for general information purposes only and may not cover important considerations that apply to you and your business. This resource is provided to you with the understanding that it does not constitute legal or other professional advice. You should not rely on this information without seeking legal advice from licensed professionals in your jurisdiction.