On October 20, the European Securities and Markets Authority (ESMA) published guidelines (Guidelines) on the scope of circumstances where an EU-listed issuer may delay disclosure of inside information, under the EU Market Abuse Regulation (MAR). The Guidelines apply to EU regulators and issuers of financial instruments admitted to trading on an EU trading venue (EU regulated market, EU multilateral trading facility (MTF) or organized trading facility (OTF)) and aim to guide such issuers when deliberating whether to delay the disclosure of inside information, in accordance with Article 17(4) of MAR.
Article 17 of MAR requires an issuer of EU financial instruments to disclose to the public inside information related to that issuer as soon as possible, unless: 1) the immediate disclosure is likely to prejudice the legitimate interests of the issuer; 2) delaying disclosure is not likely to mislead the public; and 3) the issuer is able to ensure the information remains confidential.
The latest Guidelines provide examples of “legitimate interests” of issuers that are likely to be jeopardized by the immediate disclosure of inside information. These include:
- negotiations (for mergers, acquisitions, splits and spin-offs, purchasers or disposals of major assets or restructures) where the outcome would likely be jeopardized;
- when the financial viability of the issuer is in “grave and imminent danger” (but not insolvent), and disclosure would seriously prejudice the interests of shareholders by jeopardizing negotiations to ensure the issuer’s financial recovery;
- when the inside information relates to decisions or contracts entered into by an issuer’s management body, which need (under national laws or the issuer’s bylaws) the approval of another body of the issuer (other than the shareholders’ general assembly). This situation applies when: 1) immediate public disclosure before a final decision would jeopardize the correct assessment of the information by the public; and 2) the issuer has arranged for the final decision to be made as soon as possible;
- when disclosure is likely to jeopardize the intellectual property rights of an issuer with respect to a product or invention;
- when the issuer is planning to buy or sell a major holding in another entity and disclosure would likely jeopardize that plan; or
- when 1) an issuer has announced a transaction or deal; 2) the deal is subject to a public authority’s approval on condition of meeting certain requirements; and 3) disclosing those requirements would likely affect the ability of the issuer to fulfil those requirements (and therefore prevent the success of the deal or transaction itself).
The Guidelines also detail situations where delaying disclosure of inside information would be likely to mislead the public. These situations include when the inside information:
- is materially different from a relating previous public announcement of the issuer;
- concerns the issuer’s inability to meet its financial objectives, where such objectives were previously publicly announced; or
- is different from the market’s expectations, based on signals or information previously sent to the market by the issuer (such as through interviews, roadshows or any other communications).
Next steps are for regulators to confirm whether they intend to comply with the Guidelines within two months. The Guidelines otherwise will go into effect on December 20, 2016.
The Guidelines can be found here.