When the Market Abuse Regulation (MAR) became law on 3 July 2016, ESMA had not yet produced its finalised guidance on market soundings and delays to disclosures of inside information. This has now been published. Additionally, ESMA has updated its MAR Q&As with clarification on the effect that an announcement of preliminary results has on a closed period for dealings by PDMRs.

Market soundings and delays to disclosure of inside information

In January 2016, the European Securities and Markets Authority (ESMA) consulted on draft guidelines for persons receiving market soundings and the delayed disclosure of inside information (click here to see our February newsletter article for more information). ESMA has now published feedback on that consultation together with the final text of the guidance (ESMA/2016/1130).

Key changes to note between the original draft and the final form texts are:

Market soundings

  • The provisions on what to do where a discrepancy of opinion exists between the disclosing market participant (DMP) and a market sounding recipient (MSR) as to whether the sounding includes inside information have been removed. This is on the basis that the requirement was not strictly included in ESMA's mandate. Additionally, it was felt that further dialogue between the DMP and MSR to resolve the issue could lead to the inadvertent disclosure of additional information.
  • The requirement for an MSR to implement internal procedures and training now recognises that these should be appropriate and proportionate to the scale, size and nature of its business activity.
  • The final guidance expressly states that, when an MSR assesses whether or not it is in possession of inside information, it should not have to access information behind any information barrier established by that MSR.
  • Record keeping requirements have been amended to provide that MSRs should keep records "for a period of at least five years" rather than simply "five years" as specified in the draft.

To see a copy of the final form guidance and ESMA's full response to feedback on the consultation, click here.

Legitimate interests of issuers to delay disclosure of inside information

The main change to the guidance on what constitutes a legitimate interest when the disclosure of inside information is delayed relates to the conditions listed in connection with decisions taken, or contracts entered into by, the management body of an issuer which operates under a two tier management structure - that is, where certain types of decision of the Management Board have to be approved by the Supervisory Board in order to have legal effect. This form of corporate structure is rarely seen in the UK, although some UK Societas Europaeae may be subject to it.

To see a copy of the final form guidance and ESMA's full response to feedback on the consultation, click here.

Preliminary results and closed periods

Under MAR, persons discharging managerial responsibilities (PDMRs) are prohibited from dealing during a “closed” period. This is the period of 30 calendar days before the announcement of an interim financial report or year-end report which the issuer is required to publish under either the rules of the relevant trading venue or national law.

In the UK, it is usual for issuers to publish preliminary results some time before they publish their actual reports, but, because the publication of preliminary results is not a UK requirement, there has been debate about whether preliminaries would, under MAR, bring a closed period to an end.

In June, the FCA published guidance stating that it took the view that, where an issuer announces preliminary results, this will end the closed period under MAR (provided that the announcement contains all inside information expected to be included in the year-end report). However, it specified that this view was subject to any clarification from the European Commission and ESMA. In its updated MAR Q&A (ESMA/2016/1129), ESMA has included a new Q&A (No 2), confirming that it agrees with the FCA's position. The FCA has subsequently updated its earlier published statement to refer to ESMA's Q&A (to see the updated statement, click here).