Disclosure of inside information – FCA Primary Market Bulletin

The Financial Conduct Authority (FCA) has published a Primary Market Bulletin (PMB 52) on inside information. It covers: identifying and disclosing inside information in three common scenarios; the dissemination of information during shareholder calls and meetings; and the dissemination of regulatory information during interruptions to Primary Information Provider (PIP) services.

Identifying inside information

The FCA discusses how issuers should approach inside information in the following scenarios:

• Receipt of an approach about a takeover offer – Whether the receipt of an offer is inside information should be assessed on a case-by-case basis – it does not have to have been formally considered and recommended by the board in order for it to be inside information.
• Preparation of periodic financial information – Issuers should assess on an ongoing basis whether the information they hold when preparing financial results is inside information. Where the information could be of a precise nature such that it constitutes inside information at an early stage of the process, an issuer will have to disclose the information as soon as possible. They cannot choose not to disclose on the basis that a below-forecast performance will be compensated by significant over-performance later in the year.
• CEO resignations and appointments – When a CEO is stepping down and a replacement being appointed, issuers should carefully and continually assess the point at which developments concerning the succession process constitute inside information. Separate assessments should be carried out for the resignation and appointment. It is possible that events before the formal resignation of the existing CEO and/or appointment of their replacement could be inside information. Factors issuers may want to consider when assessing the price sensitivity of the resignation and appointment could include the length of service of the existing CEO, and therefore the market’s expectation of their retirement as CEO, or the reasons behind the CEO’s resignation. If there is continuous press speculation, the issuer should consider whether this constitutes a leak.

The FCA sets out actions that issuers can consider to ensure they correctly identify inside information, including establishing a disclosure committee, training relevant employees (particularly in the finance function) to enable them to recognise inside information and documenting the reasons for determining that information was, or was not, inside information.

Dissemination of information during shareholder calls and meetings

The FCA is aware that some issuers use communication apps such as WhatsApp, Telegram or LinkedIn to interact with groups of smaller private shareholders, and hold private calls with these investor groups either to address concerns raised by the groups or to give shareholders an opportunity to ask questions about the company’s performance and strategy.

Whilst the FCA recognises that this provides smaller shareholders with an opportunity to engage directly with the issuer’s management, there is a risk that confidential, non-public or price-sensitive information is shared during these communications. The FCA says that issuers should also be conscious that any comments made by them around the trading of shares in the issuer could constitute market manipulation.

The FCA goes on to suggest actions that issuers can consider to reduce the risk that inside information or misleading statements are disclosed, including avoiding communications during the issuer’s closed period and preparing a script.

Dissemination of regulatory information during interruptions to PIP services

A PIP acts as a regulatory information service and is used by issuers to release any announcements required under the LPDT Rules (referred to as regulated information). The requirement to disseminate regulated information via a PIP resides with the issuer. The obligation does not pass to the PIP once the issuer has submitted the request to the PIP to disseminate the information.

During the outage caused by the Crowdstrike update on 19 July 2024, some issuers published regulated information on their websites despite the corresponding regulated information not being released via the PIP as a result of the outage. The FCA says that issuers should always check the announcement has been successfully made via their PIP before uploading regulated information onto their website.

The FCA also encourages issuers to consider having alternate PIP accounts to meet their disclosure obligations where their usual PIP is affected by an outage.