On January 28, 2016 the European Securities and Markets Authority (ESMA) published a consultation paper on draft guidelines relating to the Market Abuse Regulation (MAR). Article 11(11) of MAR requires ESMA to issue guidelines addressed to persons receiving market soundings and Article 17(11) of MAR requires ESMA to issue guidelines on legitimate interests of issuers to delay inside information and situations in which the delay of disclosure is likely to mislead the public. This consultation paper follows a November 2013 discussion paper on implementing measures under MAR and it comments on responses to that discussion paper.
Legitimate interest for issuer to delay disclosure of inside information
The draft guidelines provide non-exhaustive examples of situations where immediate disclosure of the inside information is likely to prejudice the issuer’s legitimate interests and these include the following circumstances:
- there are ongoing negotiations where the outcome of those negotiations would be likely to be jeopardised by immediate public disclosure of that information;
- the financial viability of the issuer is in grave and imminent danger, although not within the scope of the applicable insolvency law, and immediate public disclosure of the inside information would seriously prejudice the interests of existing and potential shareholders, jeopardising the conclusion of the negotiations aimed at ensuring the financial recovery of the issuer;
- the inside information relates to decisions taken or contracts entered into by the management body of an issuer which need the approval of another body of the issuer in order to become effective(subject to certain conditions being met);
- the issuer has developed a product or an invention and the immediate public disclosure of that information is likely to jeopardise the intellectual property rights of the issuer;
- the issuer is planning to buy or sell a major holding in another entity and the disclosure of such an information would jeopardise the conclusion of the transaction; and
- a transaction previously announced is subject to a public authority’s approval, and such approval is conditional upon additional requirements, where the immediate disclosure of those requirements will be likely to affect the ability of the issuer to meet them and therefore prevent the final success of the deal or transaction.
Situations where delay in disclosure is likely to mislead the public
The proposed guidelines set out the following non-exhaustive circumstances where delay of disclosure of inside information is likely to mislead the public:
- the inside information the issuer intends to delay the disclosure of is materially different from a previous public announcement of the issuer on the matter to which the inside information relates to;
- the inside information the issuer intends to delay the disclosure of relates to the fact that the issuer’s financial objectives are likely not to be met, where such objectives were previously publicly announced; and
- the inside information the issuer intends to delay the disclosure of is in contrast with the market’s expectations, where such expectations are based on signals that the issuer has previously set.
The consultation paper also provides draft guidelines for persons receiving market soundings. These include guidance on the following:
- appointing a designated person within the entity receiving the market sounding entitled to receive market soundings;
- communicating the wish not to receive market soundings;
- assessing whether the person receiving the market sounding is in possession of inside information as a result of the market sounding and when they cease to be in possession of inside information;
- discrepancies of opinion between disclosing market participants and the person receiving the market sounding;
- internal procedures and staff training to be established by persons receiving market soundings;
- listing of staff that are in possession of the information communicated in the course of each market sounding;
- the assessment of related financial instruments by persons receiving market soundings;
- written minutes or notes and recording of telephone calls in relation to market soundings; and
- record keeping by persons receiving market soundings.
ESMA has requested all comments on the draft guidelines by March 31, 2016. It will then finalise the two sets of guidelines and publish a final report by early Q3 2016.
(ESMA, Draft guidelines on the Market Abuse Regulation, 28.01.16)