The Financial Conduct Authority (FCA) published on 15 November 2024 its Primary Market Bulletin No. 52 (Bulletin 52). This bulletin provides helpful guidance in relation to applying the UK Market Abuse Regulation (UK MAR) in certain situations. Bulletin 52 is aimed at issuers who are subject to UK MAR namely, issuers trading on markets such as London Stock Exchange’s (LSE) Main Market and AIM and the Aquis Stock Exchange – as well as their advisers.
Bulletin 52 specifically focuses on UK MAR issues such as:
Identifying and managing ‘inside information’;
The release of regulatory information during disruptions to primary information providers (PIPs); and
Best practice for communicating with shareholders during meetings and/or calls.
Identifying ‘inside information’
In Bulletin 52, the FCA outlines different sets of scenarios and best practice guidance for identifying and managing inside information in relation to:
a takeover/takeover offer;
CEO resignations and appointments; and
the preparation of financial information
Takeover Offers
The FCA sets out in Bulletin 52, that the receipt of takeover offers is something that can often qualify as inside information. However, this will still depend on a case-by-case basis and the difficult part of assessing this, lies in the fact that during an offer process there may more than one or a series of offers made in succession and the target company will need to assess the receipt of the offer/offers as they come.
The FCA does not provide an exhaustive list of factors to take into account but notes when assessing takeover offers in relation to inside information, relevant factors might include:
the identity of the bidder;
the nature and quantum of the offer; and
the likelihood that the offer will be recommended by the board of the target company.
Further, the FCA reminds readers that following the 2014 case of Hannam v FCA [2014] UKUT 0233 (TCC) when determining whether information is ‘precise’1 enough under UK MAR that ‘more than fanciful chance’ of the future event occurring is enough – so companies should carefully consider takeover offers. Keep in mind that where an offer is within the scope of the Takeover Code, there may be circumstances where a matter is not required to be made public under the Takeover Code but may still trigger a disclosure obligation for the issuer under UK MAR.
CEO Resignations and Appointments
Bulletin 52 highlights director resignations and appointments as an important area for issuers to consider in relation to inside information – and provides guidance to issuers:
issuers need to carefully and continually assess developments concerning directors appointments, resignation and board succession generally. It is also important to note that resignations and appointments are separate pieces of potential inside information which may together or on their own constitute inside information at differing points in time. A particular area of consideration for issuers should be whether inside information arises at earlier stages before any formal resignation or appointment process occurs and that issuers should be aware that even board discussions about potential successors or signaling from a current director (as to their future) should alert the issuer to consider their obligations as to any inside information.
if an issuer has delayed disclosure of inside information such as directors’ appointments and resignations, they should continually assess/monitor the market for leaks – as in the event there is a leak disclosure would be required as soon as possible. Bulletin 52 notes some factors for issuers to keep in mind in relation to monitoring for leaks:
the accuracy of the speculation as to the:
Identity and/or;
Number of potential successors; and
the stage at which the search/appointment of new director has progressed.
Bulletin 52 also notes that companies listed on the Equity Shares Commercial Companies segment of the Main Market of the London Stock Exchange (LSE) are required under the UK Listing Rules to notify the market as soon as possible of any board changes. We would note this is also a requirement for AIM quoted companies on LSE and for companies quoted on the Aquis Growth Market of the Aquis Stock Exchange, to issue a notification without delay if a director resigns or a new director is appointed.
Financial Information
In an earlier Technical Note 506.2 the FCA has already set out that, in general, issuers should be assessing on an ongoing case-by-case basis whether the information they hold in relation to the company’s financial results could constitute inside information.
The FCA provides further specific guidance in Bulletin 52 as to examples of types of situations and financial information involving inside information and what issuers should do (or not do):
if there is financial information that is inside information, the issuer will need to disclose this as soon as possible unless it is permitted to delay disclosure.
delayed disclosure of financial information is likely to mislead the public if, for example, they have previously stated financial targets which they are now unlikely to meet. There are only limited circumstances where delayed disclosure may be permitted.
in relation to justifying non-disclosure of information it is not acceptable to offset positive and negative news to balance the effect – this is detailed in Technical Note 521.3.
When an issuer is in financial difficulty or its financial condition is worsening, issuers should not delay disclosure of this fact, with the exception being they may be able to delay disclosure of the fact or substance of negotiations to deal with/resolve its situation.
Best Practice for Managing Inside Information
The FCA highlights some key measures in Bulletin 52 that issuers should consider implementing in relation to identifying and managing inside information:
documenting and/or maintain detailed records of the reasons information was determined to be inside information (or not);
training relevant employees in relation to inside information and its management, in particular employees involved in the finance function of an issuer;
ensure that any information that is determined to be or classified as inside information is quickly controlled and/or managed – including the preparation of insider lists;
companies should look to establish disclosure committees – the role of disclosure committee is to deal with inside information/potential inside information in terms of determining and advising if information is inside information and to determine the timing, content and announcements for cleansing the market; and
in the absence of a formal disclosure committee, make sure that the CEO, CFO, Company Secretary and/or other senior management are able to make announcements on performance and event based information outside of normal reporting timetables and as required.
What do you do if your PIP is having Disruptions?
Issuers are reminded in Bulletin 52 that they are required to disclose regulated information2 via a Primary Information Provider (PIP) (also known as Regulatory Information Service).
The FCA highlights that last year on 19 July 2024, CrowdStrike’s (a cloud and data security service provider) outage left issuers unable to disseminate information via their PIPs. As such some issuers were seen publishing regulated information on their websites or other places without it having first being published via their PIP. Despite the issuers having no control over this outage and even being unaware the PIP hadn’t yet published information – they are reminded to be careful as publishing information anywhere before it has been published via a PIP could potentially result in inadvertent unlawful disclosure and issuers should never assume it has been published always check the announcement is live before publishing elsewhere.
The guidance from the FCA is fairly straightforward in relation to this:
issuers should consider setting up an account with a backup/emergency PIP in the event of disruption like the CrowdStrike one; and
to always double check successful release by their PIP before publishing anywhere else.
Shareholder Meetings and Calls
Regular shareholder engagement is one of the key principles underlying corporate governance for companies. However, with the digitisation and proliferation of communication and communications services/mediums, the FCA provides a warning to issuers regarding communicating via encrypted chat applications such as WhatsApp and Telegram and even via social media with smaller or specific groups of shareholders. Bulletin 52 particularly raises concerns about group calls being made on these apps where issuers could inadvertently make statements concerning information that might be inside information or price sensitive with the result being they could put the company and the directors personally at risk of contraventions of UK MAR for unlawful disclosure of inside information, market manipulation and even insider dealing – which carry serious civil and criminal penalties.
The Guidance provided by the FCA in Bulletin 52 for when issuers do need to communicate privately with shareholder groups is as follows:
be careful to avoid scheduling or engaging in this type of communication when the issuer is in a closed period as particularly in these periods the preparation of financial reports and information could constitute inside information;
instead schedule this type of communication shortly after the issuer has published its financial report/updated the market to allow the communication/messaging to closely align with the publicly released/announced statements;
ensure all inside information in particular information that concerns the issuers current trading and financial position has been announced and cleansed prior to its communication – this may involve issuers actively carrying out their own internal assessments prior to a shareholder call, including if required taking legal advice regarding any potential inside information;
reiterate and state on shareholder calls that the management/the issuer cannot discuss or disclose any inside information;
ensure when speaking to shareholders that management does not deviate from the language and statements that have been published particularly around the issuer’s outlook, future performance or strategy – noting it may be helpful to prepare a script of speaking notes to ensure discussion don’t deviate;
in cases involving calls/meetings on encrypted communication platforms where shareholder call or meeting cannot be recorded management should consider making a written contemporaneous note of what was discussed during the call or meeting that can be referred if needed;
in particular circumstances, for the avoidance of doubt, issuer may want to consider publishing an announcement post a shareholder call or meeting held to firstly set out that the meeting occurred and secondly set out what was discussed/information was shared and finally that the issuer does not deem any of that information to be inside information.
How can our Equity Capital Markets Team help
The Laytons’ Equity Capital Markets team is experienced in advising and assisting companies and management in relation to UK MAR and other related regulatory issues that arise in the course of public company life. If you have any questions on the matters discussed in this article or if you need further guidance on the manner in which you should be disclosing information in compliance with UK MAR, then please get in touch with us to discuss things further.
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Disclaimer: This publication is provided by Laytons LLP for informational purposes only. The information contained in this publication should not be construed as legal advice. While reasonable care is taken to ensure accuracy, the materials may not reflect the most current legal developments. Any questions or further information regarding the matters discussed in this publication can be directed to Laytons LLP and its Equity Capital Markets team.