In June 2018, the FCA published a revised draft Technical Note for consultation, setting out the FCA’s views, in the context of the process of preparing periodic financial reports, on the requirement to disclose inside information under the Market Abuse Regulation (MAR) as soon as possible and the possibility of there being a “legitimate interest” to delay disclosure.
The message is that issuers need to assess on an ongoing and case-by-case basis whether the information they hold during this process could constitute inside information. A blanket approach to the assessment (that is whether information to be included in periodic financial reports will always or never constitute inside information) is not appropriate. The revised draft Technical Note also states that issuers should record and be able to submit evidence of their assessment process to the FCA upon request.
If inside information is identified during the course of accounts preparation, an issuer then has to assess whether it can delay disclosure. Article 17(4) MAR permits delay provided that all the following three conditions are satisfied:
(a) immediate disclosure is likely to prejudice the legitimate interest of the issuer;
(b) delay of disclosure is not likely to mislead the public; and
(c) the issuer is able to ensure the confidentiality of that information.
In the revised draft Technical Note the FCA gives as an example of a case where immediate disclosure is likely to prejudice the legitimate interest of an issuer “circumstances where the issuer is in the process of preparing a periodic financial report and immediate public disclosure of information to be included in the report would impact on the orderly production and release of the report and could result in the incorrect assessment of the information by the public”.
The revised draft Technical Note is a helpful reminder that issuers should review their procedure for the preparation of financial reports, including restricting access to information, maintaining “confidential” lists detailing who within the issuer and its auditors and other advisers has access to the results information and maintaining checks throughout the process so as to identify whether there might be any potential inside information (in accordance with the issuer’s normal procedure for identifying inside information) and, if any inside information arises, whether or not the conditions to delay publication are satisfied.
The consultation closed at the end of July. The revised draft Technical Note is the second (and substantially reworked) iteration after the amendment proposed in PMB 16 (June 2016). Given the current focus on Brexit, it may be a considerable time before it is finalised, but it is a useful summary of the FCA’s thinking.