Background
Pursuant to Regulation (EU) No. 596/2014 on market abuse (the “Market Abuse Regulation” or “MAR”), in the 30 days before the publication of half yearly and annual results of an issuer whose securities are admitted to trading, persons discharging managerial responsibilities (“PMDR”) are presumed to possess inside information (i.e. the forthcoming financial results); as such, PDMRs are prohibited (subject to certain exceptions) from trading in the issuer’s securities. This 30-day period is referred to as a “closed period”. Many issuers hold pre-close calls with analysts during the closed periods in order to bring them up to speed because during the closed-period the issuers usually refrain from making any public comments. The analysts are thereby considered better informed to generate research, forecasts and recommendations in short-order after the publication of the financial statements.
It has been observed that pre-close calls can influence markets expectations and in turn, the price of financial instruments. ESMA and national regulators having observed “high volatility episodes” in EU share prices, some of which took place shortly after pre-close calls with analysts, ESMA issued best practices guidance in the form of a statement on 29 May 2024 (the “Statement”).
Content of Statement
With this Statement, ESMA reminds issuers of the prohibition of unlawful disclosure of inside information under MAR and the obligation that public disclosure of inside information should take place in accordance with Article 17 of MAR and Commission Implementing Regulation (EU) 2016/1055.
The Statement then proceeds to list various best practices that should be used to reduce the risk of unlawful disclosure of inside information.
- Prior to a pre-close call, identify what information shall be disclosed.
- Publicly announce upcoming pre-close calls.
- Simultaneously provide the material used (e.g. slides) during "pre-close calls" on the issuer's website.
- Record "pre-close calls" so that they can be made available to National Competent Authorities upon request.
- Maintain records of disclosed information during "pre-close calls" and publish them on the issuer's website for public access.
In anticipation of closer scrutiny by EU regulators going forward, these best practices should be carefully considered and implemented, whereby appropriate, by the relevant departments of EU issuers.
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