By Mark S. Nelson, J.D.
The European Securities and Markets Authority (ESMA) published a final report detailing guidance on when issuers may delay the disclosure of inside information possessed by them. The report specifically contains an amended version of the Market Abuse Regulation (MAR) Guidelines with emphasis on the MAR transparency obligations and inside information and the prudential supervisory framework.
“The Guidelines are aimed at providing clarity, enhancing legal certainty and fostering supervisory convergence and should assist issuers in conducting their assessment as to whether they meet the conditions to delay inside information in accordance with MAR,” said a press release announcing the revised guidelines.
According to the report, the MAR requires that issuers generally should publicly disclose inside information directly concerning them as soon as possible. But, if certain conditions are met, an issuer may delay the disclosure of inside information, such as where disclosure of the inside information could prejudice an issuer’s legitimate interest, delayed disclosure is unlikely to mislead the public, the issuer ensures the confidentiality of the inside information.
Revised Guideline 1 specifies two additional circumstances where immediate disclosure of inside information is likely to prejudice an issuers’ legitimate interests. One such circumstances concerns redemptions and repurchases. The other circumstance concerns the receipt of a draft Supervisory Review and Evaluation Process (SREP).
New Guidelines 3 and 4 address the question of whether a draft/final Pillar 2 Capital Requirements (P2R) or Capital Guidance (P2G) constitute inside information. In both instances, an issuer should verify that the P2R/P2G is: (1) non-public; (2) directly related to the institution that received it; and (3) is of a precise nature. In both instances the issuer also should assess the price sensitivity of the P2R or P2G. In the case of a P2R, the P2R is generally considered inside information and is highly likely to be price sensitive. With respect to a P2G, however, the revised guidelines suggest that the P2G is inside information and then provide two examples of when a P2G is expected to be price sensitive: (1) there is a non-minor change and the institution likely will act (e.g., to increase capital); and (2) the P2G does not align with market expectations (i.e., a price impact is expected).
Under the revised guidelines, competent authorities to which the guidelines apply must notify ESMA within two months of the date of publication if they are in compliance with the guidelines, are not incompliance but intend to comply, or are not in compliance and do not intend to comply.