The revised guidance is largely unchanged since the FCA issued a draft for consultation in June last year. Its purpose is to remind listed companies that their obligations in relation to inside information under the Market Abuse Regulation continue during the preparation of their annual reports and accounts (or any other interim reports). The underlying message is that companies should not assume they can delay announcing inside information identified when preparing the accounts on the basis that the information will be subsequently disclosed when they announce their results. A delay is only possible if all three of the MAR conditions for a delay are met i.e. immediate disclosure is likely to prejudice the company's legitimate interests; delay is not likely to mislead the public; and the company is able to ensure the information's confidentiality.
The guidance says that companies should begin from the assumption that information relating to financial results could constitute inside information. They should exercise judgment and conduct an ongoing assessment in good faith (as the status of the information may change). Companies also need to record and submit evidence of the assessment process if the FCA requests.
The guidance does not give examples of information that could amount to inside information in these circumstances. However, when a round table of the GC100 previously considered the issue in November 2016, it was suggested that while some financial results are clearly inside information (for example, results outside consensus expectations requiring a profit warning), some are clearly not, and some fall within a grey area in between.
If the company identifies inside information, it must be announced immediately, unless the three circumstances for a delay apply. As an example of a legitimate interest of the company that is likely to be prejudiced by immediate disclosure, the FCA gives the circumstances where the company "is in the process of preparing a periodic financial report and immediate public disclosure of information to be included in the report would impact on the orderly production and release of the report and could result in the incorrect assessment of the information by the public". However, the FCA expects that in many cases the company will be able to make an appropriate announcement that will enable the public to assess correctly the inside information, although in some cases it accepts this will not be possible other than through publication of the full report.
Even where the company can argue that it has a legitimate interest that needs protecting, MAR does not permit a delay where to do so would mislead the public. In particular, the ESMA guidelines on delay in the disclosure of inside information give a number of examples of when ESMA considers a delay is likely to mislead the public. These include the situation where the company has previously announced financial objectives that are now no longer likely to be met.
A company must notify the FCA of any decision to delay announcing inside information, and provide its justification for doing so if the FCA requests. Article 4 of Commission Implementing Regulation (EU) 2016/1055 sets out the detail of the information the company must record if it chooses to delay.
As it stands, the FCA's guidance does not take companies much further forward, although it does reiterate the point that unwelcome news can rarely be delayed. Companies need to be alert during the preparation of results as to whether they are in line with consensus expectations, and if not, whether an immediate announcement is required. If the company concludes its financial results do not contain inside information, it needs to be able to justify (and document) this decision. Equally, where the company does identify inside information, the exact time and date must be recorded, and if, after careful analysis, it concludes a delay in announcing is justifiable, it must document this and protect the confidentiality of the information.
Client Alert 2019-116
