Issuers at Midstream: Disclosure of Multistage Events in the Current and in the Proposed EU Market Abuse Regime

In order to ensure investor confidence and to enhance the smooth functioning of price discovery, issuers of shares traded in European regulated markets are required to inform the public of inside information which directly concerns them (directive 2003/6/EC – market abuse directive – and implementing measures). However, the boundaries of “inside information” to be disclosed may sometimes be blurred. This paper investigates when, under the market abuse directive framework, information regarding uncertain and multistage events triggers the issuer’s obligation to disclose. To this end, first to be determined is when such a piece of information may be regarded as being both of a precise nature and likely to have a significant effect on share price according to the rules set forth by the market abuse directive, as interpreted by the European Court of Justice in its recent decision Markus Geltl v Daimler. Second, the article addresses to what extent the publication of news amounting to inside information may be deferred in light of the rules on delayed disclosure under the market abuse directive. Because premature information is often linked to market rumours, a section is then dedicated to what issuers should do when unpublished news is spreading throughout the market. For each of the points touched upon by this paper, the analysis also considers the proposal for a new market abuse regulation the EU Commission issued in October 2011 and proposes, de lege ferenda, some improvements. In particular, the paper suggests: (1) an amendment to the new proposed framework on market abuse that deletes draft Art. 6 (1)(e), and therefore avoids the consequence that every piece of material information may constitute the basis of insider dealing; (2) introducing a clearer definition of information that is to be disclosed by listed companies, or at the very least clarifying that inside information relating to a multi-stage process need only be made public once the end stage is in and of itself inside information, unless a leakage has occurred; (3) modifying the conditions under which dissemination can be delayed by repealing any reference to the possibility that investors are misled; (4) maintaining and extending the wording of the current 29th and 30th recitals of the market abuse directive and moving it directly into the regulation; finally, (5) introducing a clear EU provision on rumours in order to provide issuers and investors with greater legal certainty and to avoid excessive regulatory discretion.