DTR 2.5 Delaying disclosure of inside information

3Issuers should be aware that ESMA has issued guidelines under article 17(11) of the Market Abuse Regulation which contain a non-exhaustive indicative list of the legitimate interests of issuers to delay disclosure of inside information and situations in which delayed disclosure is likely to mislead the public: see the ESMA MAR delayed disclosure guidelines4.

1. (1)

   Delaying disclosure of inside information will not always mislead the public, although a developing situation should be monitored so that if circumstances change an immediate disclosure can be made.

2. (2)

   Investors understand that some information must be kept confidential until developments are at a stage when an announcement can be made without prejudicing the legitimate interests of the issuer.

1. (1)

   In the FCA’s opinion, paragraph 5(1)(8)(a) of the ESMA MAR delayed disclosure guidelines does3 not envisage that an issuer will: 2

   1. (a)

      delay public disclosure of the fact that it is in financial difficulty or of its worsening financial condition and is limited to the fact or substance of the negotiations to deal with such a situation; or2

   2. (b)

      delay disclosure of inside information on the basis that its position in subsequent negotiations to deal with the situation will be jeopardised by the disclosure of its financial condition.2

2. (2)

   Paragraph 5(1)(8)(c) of the ESMA MAR delayed disclosure guidelines3 refers to an issuer with a dual board structure (e.g. a management board and supervisory board3) delaying the disclosure of inside information in certain circumstances3. As this paragraph is not relevant to an3 issuer with a unitary board structure it3 should only be relevant3 to a very limited number of issuers in the United Kingdom.

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An issuer should not be obliged to disclose impending developments that could be jeopardised by premature disclosure. Whether or not an issuer has a legitimate interest which would be prejudiced by the disclosure of certain inside information is an assessment which must be made by the issuer in the first instance. 3

1. (1)

   [deleted]2

2. (2)

   Selective2 disclosure cannot be made to any person simply because they owe the issuer a duty of confidentiality. An issuer may, however, depending on the circumstances, be justified in disclosing inside information to certain categories of recipient (in addition to those employees of the issuer who require the information to perform their functions) as long as the recipients are bound by a duty of confidentiality. 5For example, an issuer contemplating a major transaction may selectively disclose details of the proposed transaction to major shareholders in order to ensure the viability of the transaction (whether or not the proposed transaction requires prior shareholder approval)5, or to 5its lenders and/or credit-rating agency where the transaction could significantly impact its lending or credit rating, 5as long as the recipients are bound by a duty of confidentiality. The categories of recipient may2 include, but are not limited to, the following:

   1. (a)

      the issuer's advisers and advisers of any other persons involved in the matter in question;

   2. (b)

      persons with whom the issuer is negotiating, or intends to negotiate, any commercial financial or investment transaction (including prospective underwriters or placees of the financial instruments of the issuer);

   3. (c)

      employee representatives or trade unions acting on their behalf;

   4. (d)

      any government department, the Bank of England, the Competition Commission or any other statutory or regulatory body or authority;

   5. (e)

      major shareholders of the issuer;

   6. (f)

      the issuer's lenders; and

   7. (g)

      credit-rating agencies.

Selective disclosure to any or all of the persons referred to in DTR 2.5.7 G may not be justified in every circumstance where an issuer delays disclosure in accordance with article 17(4) and (5) of the Market Abuse Regulation2.

An issuer should bear in mind that the wider the group of recipients of inside information the greater the likelihood of a leak which will trigger full public disclosure of the information2 under article 17(8) of the Market Abuse Regulation2.