The integrity of financial markets relies on the mechanisms for controlling the flow of inside information. This article highlights 6 situations when MAR regulated entities may deviate from the general rule of immediate disclosure of inside information.
What are the general prerequisites for delaying disclosure of inside information?
You may delay disclosure if all the following conditions are met:
- Delayed disclosure is not likely to mislead the public.
- The company can ensure the confidentiality of the inside information.
- Immediate disclosure is likely to prejudice the legitimate interest of the company.
Why would I delay disclosure of inside information?
If the immediate disclosure of inside information is considered to be damaging the issuer’s legitimate interests, the ESMA guidelines highlights a few examples where delayed disclosure of inside information may be allowed:
1. The company has invented a product
The company has developed a product or invention whereby the immediate disclosure of such information would likely jeopardize the company’s intellectual property rights (e.g. results of clinical trials of new drugs).
2. The company plans to buy or sell a larger holding in another company
The company plans to buy or sell a larger holding in another company and the disclosure of such information would likely jeopardize the implementation of such plan.
3. The company participates in ongoing negotiations
The company participates in ongoing negotiations which results are likely to be jeopardized by immediate disclosure (e.g. mergers, acquisitions, splits and spin-offs, purchases or disposals of major assets or branches of corporate activity, restructurings and reorganizations).
4. The company’ s financial viability is in grave and imminent danger
The company’ s financial viability is in grave and imminent danger (although not within scope of applicable insolvency law) and, in addition, immediate disclosure of inside information would seriously prejudice the interests of existing and potential shareholders by jeopardizing the conclusion of negotiations designed to ensure the financial recovery of the company.
5. The inside information relates to decisions taken by the management body which also need to be approved by another body of the company.
The inside information relates to decisions taken (or agreements concluded) by the company’s management body, which, according to national law or the Articles of Association, also need to be approved by another body of the company (principally a supervisory ”Dual Board” pursuant to the German model) , other than the shareholders’ general meeting, in order to become effective, provided that:
(1) the immediate disclosure of this information before the definite decision is taken would jeopardize a proper assessment of the information by the public, and
(2) the company arranged for the definitive decision to be taken as soon as possible.
6. A transaction previously announced is subject to a public authority’s approval, and such approval is conditional upon additional requirements.
A transaction previously announced is subject to a public authority’s approval, and such approval is conditional upon additional requirements, where immediate disclosure of those requirements will likely affect the ability for the company to meet them and therefore prevent the final success of the deal or transaction.
Are there any other situations where delaying disclosure would be appropriate?
Yes, the guidelines are not exhaustive and there are also various local regulatory adaptations. In e.g. Sweden a practice has been developed when it comes to creating insider lists ahead of financial reports, which is not based upon the explicit language of above exemplifying guidelines/cases.