The FCA proposes to amend the DTR guidance which covers an issuer’s legitimate reasons for delaying disclosure of inside information. Its consultation paper CP15/38, published today, follows feedback from stakeholders after the Upper Tribunal decision in Ian Hannam v FCA. Comments must be received by 20 February 2016.
There has been a concern that the definition of inside information was being applied increasingly widely – and both the ‘precise’ and ‘significant effect on price’ tests in the definition of inside information have prompted much debate recently following a number of cases in the UK and the ECJ.
At the same time, the grounds for delaying disclosure – other than in relation to impending developments or matters to protect a legitimate interest of the issuer – have been understood rather narrowly. This is because – even though the examples of legitimate interests (in DTR 2.5.3R) are stated not to be exhaustive – a combination of factors is causing issuers difficulty in deciding what should be disclosed and in particular more rather than less. A common view is that these factors could soon force issuers into disclosing information at a stage where it is still significantly unformed and would be of little benefit to the market.
The FCA’s proposal is that the last sentence of DTR 2.5.5G be removed – so as to clarify that issuers may have a legitimate reason to delay disclosure in circumstances other than the non-exhaustive examples listed in DTR 2.5.3R or the circumstances described in DTR 2.5.5AR. It is seeking views as to whether that is sufficient – or whether further guidance as to the meaning of ‘legitimate interest’ is required.
Overall, the FCA is keen to emphasise that the primary aim of the rules is to create transparency – and the over-arching policy intention is to promote a properly functioning market by ensuring that investors have sufficient and timely information in order to make investment decisions. In particular, it believes that the condition that delaying disclosure must not be likely to mislead the public will continue to provide an appropriate balance within the rules – and help ensure an appropriate quantity and quality of disclosures going forward.