ESMA has released a final report including a proposed delegated act that addresses:
- disclosure of inside information in a protracted process; and
- delayed disclosure of inside information.
The technical advice is being released in support of the EU’s new Listing Act package, which itself affects both MAR and MiFID, the latter in relation to SME growth markets (SME GMs).
Once again this is a very lengthy and complex document that includes a summary of the comments received by ESMA to all elements of its consultation paper as well as the regulator’s response to the feedback.
This brief article summarizes some of the more significant areas where industry feedback has prompted changes to the approach initially proposed by ESMA.
Protracted process
A key change to the initial proposal is an amendment to the definition of a protracted process itself (bold indicates newly introduced text):
| Original definition | New definition |
| … a series of several actions or steps spread in time which need to be performed, in order to achieve a pre-defined objective or result. | … a series of actions, steps, or decisions spread in time which need to be performed, at least in part by the issuer, in order to achieve an intended objective or result |
In a significant shift away from ESMA’s initial proposals, which were deemed not to reflect industry practice by respondents, the final rules identify the moment that an agreement is legally binding as the event that triggers the obligation to disclose.
ESMA does point out that in instances where shareholder approval is required, which means communicating details of the transaction to a larger group of stakeholders prior to the actual execution of an agreement, disclosure taking place ahead of actual shareholder approval is “essential.”
The initial proposal was also critiqued by industry for distinguishing between friendly and hostile takeovers because such a distinction “lacks a clear legal basis and does not reflect the complexity of the process.”
Takeover Directive
References to a takeover have been removed from the final version of the document, with ESMA acknowledging that inclusion may have led to conflict with the provisions of the Takeover Directive, which “already provides some specific safeguards for market integrity”.
ESMA’s proposed and final rules require the evaluation of “multiple announcements or communications” in order to “get the full picture of the issuer’s stance on the matter”. However, ESMA stresses that this is only expected in limited cases and has amended Recital 15 accordingly.
There are also some subtle changes to the rules around various other communications by the issuer with the ambiguity around “persons representing the issuer” reduced and regulatory filings only encompassing those that are publicly available.
Finally there are some amendments to the list of examples illustrating situations where there is a contrast between the inside information to be delayed and the latest issuer’s announcement or communication.
Annex I reproduced in the document contains a non-exhaustive list of final circumstances or events as well as the moment that disclosure of inside information is required in a protracted process. This is worth reviewing in detail and is therefore linked here in full.
