The UK Financial Conduct Authority (FCA) has published a policy statement (PS17/2) in response to CP16/38. The changes to DTR 2.5 became effective on 24 February 2017.
Please click here for our update explaining the proposed changes to DTR 2.5 and the background. Briefly, one of the conditions set out in Article 17(4) of the Market Abuse Regulation (MAR) which permits an issuer to delay disclosure of inside information is that "immediate disclosure is likely to prejudice the legitimate interests of the issuer". The European Securities and Markets Authority (ESMA) has published guidelines setting out a non-exhaustive list of "legitimate interests" (Guidelines) and the FCA's consultation was designed to amend DTR 2.5 to ensure consistency with the Guidelines. Two of the examples given in the Guidelines are as follows:
- the issuer is conducting negotiations where the outcome of the negotiation would be jeopardised by immediate disclosure
- the financial viability of the issuer is in grave and imminent danger although not within the scope of the applicable insolvency law, and immediate disclosure would seriously jeopardise the conclusion of negotiations designed to ensure the financial recovery of the issuer.
In its policy statement, the FCA has restated its view that DTR 2.5.4G (as amended) is consistent with the Guidelines although it had been suggested that it should be deleted and that issuers and their advisers should just refer to the Guidelines themselves. In our view, it is at least arguable that the amended wording is not in fact consistent with the Guidelines and that it may still reflect the FCA's pre-MAR approach to disclosure of financial difficulties. It will therefore be interesting to see how the FCA interpret the Guidelines and DTR 2.5.4G in practice. These provisions are of course of most relevance to issuers in financial difficulties and to the question at what point disclosure of financial difficulties should be made.
The FCA has helpfully confirmed that the ESMA list is indicative and non-exhaustive whilst stating that it is the FCA and ESMA's expectation that Article 17(4) of MAR should be narrowly interpreted and that all the conditions in Article 17(4) must be met in order to delay the disclosure of inside information.
Please speak to one of the Ashurst contacts below or any Ashurst corporate partner if you wish to discuss this update.
