The main rule in MAR is that inside information should be published as soon as possible (Article 17). However, a publication may be postponed if all of the following conditions are met (Article 17.4):
(1) immediate disclosure is likely to prejudice the legitimate interests of the Company;
(2) it is unlikely that deferred disclosure misleads the public; and
(3) the company can ensure that the information remains confidential.
The requisite (1) above is, in particular in Sweden, the most debated and difficult to interpret. Already 20 October 2016, ESMA issued guidelines with a non-exhaustive list of such possible cases. None of these examples gives any clear guidance on how to handle the very common questions concerning the company reporting. Yet, the ESMA example therein which has, by some experts, been interpreted to be closest at hand is p. 5(1)(8)(c):
“the inside information relates to decisions taken or contracts entered into by the management body of an issuer which need, pursuant to national law or the issuer’s bylaws, the approval of another body of the issuer, other than the shareholders’ general assembly, in order to become effective, provided that:
i. immediate public disclosure of that information before such a definitive decision would jeopardise the correct assessment of the information by the public; and
ii. the issuer arranged for the definitive decision to be taken as soon as possible.”
The interpretation of this point (c) is not obvious. Yet, what it initially and primarily sought to address was jurisdictions having a dual board (“two tier”) system, rather than company reporting.
Certain NCAs (notably UK FCA per its 2018 guidance consultation) have in fact provided some guidance regarding requisite (1) (“likely to prejudice”) concerning specifically when an issuer is in the process of preparing a periodic financial report. UK FCA has thereby indicated that delayed disclosure could indeed be allowed when: “immediate public disclosure of information to be included in the report would impact on the orderly production”. UK FCA, in the very same sentence, then goes on to add requisite (2). (Still of course, requisite (2) and (3) need also to be fulfilled.) Reading the above and also taking into account expert opinions in this field from other jurisdictions, it is close at hand to interpret the prevailing views as that issuers would basically be entitled to delay disclosure of financial reporting in production, not really just because premature release(s) would confuse the public but importantly also because it would simply create chaos for the issuer in its financial reporting process.
Still, it is equally clear that a “blanket approach” is prohibited: i.e. to consider financial reporting information to always – or never – constitute inside information.
The reporting of the company typically constitutes a somewhat particular insider situation. It is to some extent a very regulated process, where the company typically expects inside information to arise at some point (late) in the process. It could thereby appear close at hand to source some analogous support from point (c) – especially when reading point (i) and typically also (ii) – in the sense of determining the very reason for delaying disclosure. MAR (Article 17) “as soon as possible” is also a central component in the analysis.
Some experts have thereby also argued that if financial reporting data is released “bits and pieces”, just before the board shall in fact decide upon the proposed report, this could impair the decision process and become confusing to the market. In line with this approach is also the reasoning of Nasdaq Stockholm that if a report is deemed inside information and the board approves of a financial report after the closure of the exchange, then Nasdaq would accept a release early next morning (before opening).
What might be described as an integrated component of the analysis is hence also the difficult assessment of exactly when in the process the information being compiled, analyzed and proposed reaches such a level of gravity and finality that it could indeed be considered inside information in the strict sense of MAR.
How could it then in reality be concluded that different issuers are – or should be – handling this?
It may often be clear that an issuer which merely issues normal bonds, as well as possibly certain very stable and foreseeable companies, can typically not be said to issue reports with inside information at all in the strict sense of MAR. It is also equally clear that many operating companies issuing equity instruments have reporting which indeed contain inside information.
Different companies take slightly different approaches to this difficult assessment dilemma. The most common approach is the “better safe than sorry” approach. Certain issuers however factually make a more thorough “case by case” assessment.
The “better safe than sorry” approach has, at least in Sweden, been the prevailing and commonly accepted approach. The “better safe than sorry” approach has also been extended to not only apply to the final assessment of whether the content of the report information in fact constitutes inside information. It has also been the approach in the sense that issuers typically consider the information to constitute inside information already very early in their stereotyped reporting process, thereby having some stereotyped process where different groups of persons are added as insiders at different stages. Typically, in larger companies such groups and persons are added later, given that such a large company has a more compartmentalized system isolating different parts of its bookkeeping.
The general conclusion would be that reporting is a field which is not specifically regulated and that the practices (which notably not only differ slightly between different kind of issuers but also between jurisdictions) factually established can often not be validated by obvious legislative language. Still, the “better safe than sorry” approach, which commonly prevails within the compliance community, has so far turned out to be a successful strategy in terms of avoiding the serious sanctions which can be imposed under MAR.
A final point worth mentioning is also that an issuer which delayed disclosure when preparing a financial report still must notify the supervisory authority when subsequently publishing the report on the indicated publication date.
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