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  • Gemma Morgan, Howells Associates Legal Director

EU Market Abuse Regulation – Periodic Financial Information and Inside Information

On 16 April 2019, the FCA published its 23rd Primary Market Bulletin. The bulletin summarises the feedback received by the FCA on the issue of identifying and handling inside information during the preparation of periodic financial reports.

The Background

The Market Abuse Regulation (MAR) requires the disclosure of price sensitive inside information so as to enable markets to operate efficiently. However, MAR recognised that there can be legitimate circumstances in which a company should be able to delay the release of such information.

MAR requires three tests before information can be kept ‘inside’

  1. Immediate disclosure likely to prejudice the Company’s legitimate interests;

  2. Delay is not likely to mislead the public;

  3. The Company is able to keep the information confidential.

The ESMA guidelines (October 2016) added more colour

1. When could it be in the legitimate interests to keep information “inside”?

Three useful examples included in the guidelines were:

  • The outcome of negotiations could be jeopardised by immediate public disclosure (e.g. mergers, acquisitions)

  • The company is in major financial difficulties and disclosure could prejudice these negotiations

  • Risks to intellectual property rights if immediate disclosure were to occur

2. When may non-disclosure mislead the public?

Examples given by ESMA include:

  • The information is materially different to previous public announcements

  • The information concerns the fact that the Company’s previously published financial objectives are not likely to be met;

  • The inside information is in contrast to market expectations

FCA 23rd Primary Market Bulletin Update

Periodic financial information

Of course, the production by a Company of its periodic financial reports can be a time at which concerns and therefore debates arise as to whether information is inside information and whether it may/should be kept inside. In the context of the requirements of MAR and the October 2016 Guidelines the FCA consulted on updating guidance note UKLA/TN/506.1 which deals with periodic financial reports and inside information. The guidance note builds on ESMA guidelines. It represents a significant re-write of the previous version of UKLA/TN/506.1.

The outcome of the consultation is that several suggestions from issuers and stakeholders would have inappropriately softened or directly contradicted the key messages that the FCA wants to communicate.

Ongoing assessment?

One criticism of the draft report by respondents was a requirement for an assessment process which is ongoing throughout the period of preparing the financial reports. This remains but the FCA clarify that ongoing review does not necessarily have to involve regular board or disclosure committee meetings – the role of ongoing review can be delegated to appropriately qualified individuals. The FCA specifically say “it is not acceptable for a firm to take a view at a given point in time and to remain of that view [….] without undertaking further assessment”.

Should or could?

A further comment makes it clear that financial results could constitute inside information but equally, they could not.

Blanket approach?

This deals with a point raised in the draft technical note that Companies must not take a blanket approach – for example, that information in financial reports is always (or is never) inside information. Blanket approaches simply must not be taken.

The importance of confidentiality

The FCA will, however, update the guidance to clarify that, in order to delay disclosing inside information in line with Article 17 of the Market Abuse Regulation, an issuer must be able to ensure the confidentiality of the information in question.

For further information:

ESMA October 2016 guidelines:

Draft Technical note:

Market Bulletin 19 (introducing the proposed changes):

Disclaimer This news item should not be taken as definitive advice; they are Howells' understanding of the FCA update and MAR. They are not to be taken as a legal opinion and you should gain appropriate advice before taking any action.