Notification without delay

Profit warnings are not ‘nice to haves’ as there may be circumstances when they are obligatory. An issuer must notify the Exchange, members of the issuer and other holders of its listed securities, without delay, where, to the knowledge of the directors, there is a change in the issuer’s financial condition or in the performance of its business or in the issuer’s expectation of its performance and that knowledge of the change is likely to lead to a substantial movement in the price of its listed securities. This obligation is, and has always been, in Note 11 to Rule 13.09(1) of the Listing Rules.

In preparing periodic financial reports, circulars and other listing documents, if directors and senior management become aware of material information that is potentially price-sensitive, they cannot defer releasing such information until the disclosure document is issued but must make separate immediate disclosure to bring it to the attention of the market.

Timing of disclosure is crucial

The overriding principle is that information which is expected to be price-sensitive should be announced immediately it is the subject of ‘a decision’. That is, ‘a decision about whether the information has characteristics, in the prevailing market conditions, that would be reasonably expected to materially affect market activity in and the price of the issuer’s securities’. Not being able to physically convene a full board meeting is no excuse for delaying an announcement nor is the issuer’s internal inefficiencies in identifying all relevant information a justification for delay. If further work is needed to fully investigate the potentially price-sensitive matter before complete information can be disclosed, a ‘holding’ announcement must be made. Further disclosures should follow once the issuer is in a position to give more precise details.

Responsibility for compliance

The ‘controlling mind’ of an issuer comprising its directors and, through delegations of authority, members of senior management, takes responsibility for compliance with the disclosure obligations under the Listing Rules. The Exchange expects an issuer to meet the following minimum standards.

  • Robust and effective internal control ?? systems need to be in place. These systems need to support the identification and timely escalation of reliable information to an issuer’s board or those directors authorised to ensure compliance. This is to facilitate speedy decisions on the need for disclosure and to reduce any delay in disclosure to a minimum.
  • Periodic financial reporting procedures need to be maintained. This is to ensure a structured flow of financial and operational data to appraise an issuer’s financial condition, performance or expectations of its performance
  • Provision of monthly management accounts to issuers’ boards. For most issuers, provisions of monthly management accounts shortly after monthend to their boards will be a minimum requirement. Other insightful operational data may be available at an even earlier stage and should be identified and escalated in a structured manner.
  • Vetting and authorisation processes need to be in place. This is to ensure that regulatory announcements are made in a timely manner, are factual, do not omit material information and are presented in a clear and balanced way. 
  • Directors and senior management must know the rules. It is incumbent on the directors and senior management of issuers to make their own judgments when considering how to comply with the continuous disclosure obligations – they have to be familiar with the principles and rules under the Listing Rules, including the Guidance.

Negotiations concerning transactions, fund raising and other proposals

Issuers are expected to ‘filter’ materials to assess whether the information in any of the documents, individually or together, constitute potentially price-sensitive information before they are made available to third parties. Disclosure of a material change in financial performance cannot be delayed whilst the negotiations proceed.

Legitimate delay in disclosure

The Listing Rules contemplate very limited scope for a delay in public disclosure concerning transactions or the raising of finance. Delay in disclosure is only possible provided that:

  • the issuer is able to ensure the confidentiality of that information; and
  • such delay will not lead to the establishment of a false market.

In such cases, persons receiving such information will be expected not to deal in the issuer’s securities until the information has been released.

Suspension – a last resort

Where an issuer faces significant uncertainties, the Exchange expects such issuer to give a detailed and carefully crafted account of the nature and scale of the uncertainties and details of actions taken and to be taken by such issuer so that the market is properly informed. However, if doing so risks creating a false (misinformed) market of the issuer’s securities, the issuer should seek a suspension of trading of its shares pending clarification of the position. Any such suspension statement should indicate the nature of the matter pending clarification. For example, the statement might indicate ‘pending clarification of the issuer’s financial position’.

Handling market rumours

There is no positive obligation on issuers to deny wholly unfounded rumours. Denials by issuers must be made through a formal announcement rather than just a remark to the media or through a press release. An issuer should issue a corrective announcement without delay if it is concerned that reactions to wholly unfounded rumours will or are creating a disorderly market.

Clarification announcements are not necessarily required by the Exchange if there are rumours relating to an issuer in the media. However, the Exchange will expect a full justification from the issuer on its proposed course of action and confirmation of its true position so that the Exchange can monitor developments properly. Issuers and their advisors have now been warned in the Guidance not to mislead the Exchange in these circumstances, as issuers are obliged to provide this information under Rule 13.10 of the Listing Rules. Any suspected misleading conduct may be investigated by the Exchange subsequently.

A full text of the Guidance, including the directors’ compliance checklist, is available at: