The Obligations of Issuers Who Delay the Disclosure of Inside (Ahem, 'Relevant') Information

The new Market Abuse Regulation (‘MAR’) follows, in substance, the former Market Abuse Directive (‘MAD’) in relation to both the obligation of listed issuers to inform the market as soon as possible of any inside information concerning them, as well as the corresponding faculty of the issuers to delay such disclosure when a series of conditions are met. However, the MAR has attempted to reduce issuers' discretion regarding the decision to delay disclosure, so as to ensure greater uniformity in their practices, and to enhance the supervisory authorities' capacity to monitor and oversee the use that is made of this faculty.

This new regulation is especially relevant under Spanish law, not only because the MAD was defectively implemented in this area, but also because Spanish law has traditionally distinguished between ‘inside information’, for the purpose of the prohibition against using it to perform transactions, and ‘relevant information’, which is the one that applies to the issuers' duty to disclose to the public. But since there are no material or substantive differences between the two (apart from the cases in which the notification of ‘relevant events’ serves as a means for disseminating information that is not inside information, such as meeting announcements, corporate governance reports, and remuneration reports, etc), it is more correct to use a single concept of ‘inside information’, as the MAR does. In this way, information is considered inside information right from the time of its creation (due to its specific nature, because it can have a significant effect on share prices, etc) and, as a rule, it must be disclosed ‘as soon as possible’ (Art 17.1 MAR).  But the issuer can delay the disclosure of this information in certain cases in order to avoid harming its legitimate interests, despite it being considered inside information for the purpose of the prohibition against transacting with it.

Although the conditions required for this delay are basically the same as under the MAD (ie, that immediate disclosure is likely to prejudice the legitimate interests of the issuer, that a delay in disclosure is not likely to mislead the public, and that the issuer is able to ensure the confidentiality of the information), their actual scope and meaning has been clarified by ESMA (see ‘MAR Guidelines on the Delay in the disclosure of inside information’ dated October 2016). Also, the MAR and its implementing rules impose a large set of obligations upon issuers that make use of the faculty to delay the disclosure, in order to ensure effective compliance with the conditions required for it and to allow the supervisory authorities' to monitor and oversee the use that is made of such faculty. The issuers' main obligations in this regard include: the obligation to record and document in writing a long list of information in relation to the delay (disclosure record), the obligation to inform the supervisory authorities once the inside information is made public in any case, or – depending on the option chosen by each Member State – only when so required by the supervisory authority, setting up mechanisms for the immediate disclosure of the information in case of rumours when these can be attributed to a leak, and drawing up an insider list.

This post comes to us from Javier García de Enterría at Clifford Chance and is based on a Client Briefing that can be found here.