FCA Market Bulletin 52: Key Highlights and Guidance

Introduction

On 15 November 2024, the Financial Conduct Authority (FCA) published Primary Market Bulletin 52 (PMB 52), offering helpful reminders about the application of the Market Abuse Regulation (MAR) in several critical areas. This bulletin highlights three common challenges issuers face when identifying and managing inside information, emphasizes the importance of clear communication during shareholder meetings, and addresses the dissemination of regulatory information during interruptions to PIP (RNS) services. Below is a detailed summary incorporating FCA recommendations and additional insights.

1. Identifying Inside Information

The FCA focuses on three specific scenarios where issuers frequently encounter challenges: offer processes, preparation of periodic financial information, and CEO resignations and appointments.

(i) Offer Processes

Whether the receipt of an offer constitutes inside information depends on a case-by-case analysis.

Key considerations include:

• The identity of the bidder.
• The nature and quantum of the offer.
• The likelihood of board recommendation.

Under MAR, information is "precise" if it points to a set of circumstances that exist or may reasonably be expected to come into existence. Referring to the Hannan case, the FCA concludes that receiving an offer could qualify as inside information even before board recommendation.

The FCA stresses that where a takeover offer falls within the Takeover Code, there might still be MAR disclosure obligations. Issuers cannot rely solely on the Code's requirements to determine whether public disclosure is necessary. Furthermore, issuers should avoid relying exclusively on advisers' opinions about the timing of disclosure and should make their own compliance assessments.

(ii) Preparation of Periodic Financial Information

Issuers must assess on an ongoing, case-by-case basis whether information they hold constitutes inside information. The FCA references Technical Note 506.2, emphasising that financial results, even during preparation, often meet this threshold.The FCA highlights scenarios where issuers have delayed disclosing underperformance, assuming it would be offset by later overperformance. When such compensation fails to materialise, share prices have fallen significantly (sometimes by 40%-50%). Delayed disclosures have also been linked to the loss of key contracts.

Issuers are reminded:

• Timely disclosure is required where financial objectives can no longer be met.
• Delayed disclosure under Article 17(4) of MAR is permissible only in specific circumstances, such as protecting legitimate interests and ensuring confidentiality.
• Justifying non-disclosure by offsetting negative news with potential positive outcomes is not acceptable (Technical Note 521.3).

Additionally, DTR 2.5.4G highlights that issuers should not delay disclosures of worsening financial conditions, even if negotiations to resolve the issue can remain confidential.

(iii) CEO Resignations and Appointments

Issuers must carefully and continually assess whether CEO resignations or appointments constitute inside information. The FCA recommends treating these developments as two separate assessments:

• The resignation: This could become inside information early, such as when the CEO signals their intention to step down.
• The appointment: The same scrutiny applies to successor identification and selection, especially when involving external candidates.

Speculation or leaks about CEO transitions require immediate issuer action. Factors to consider include:

• Market expectations due to the CEO’s tenure.
• The existence of a natural successor.
• Reasons behind the CEO’s resignation.

Issuers with shares listed in the Equity Shares (Commercial Companies) category must comply with UKLR 6.4.6R, notifying a Regulatory Information Service (RIS) about board changes by the close of business on the day after a decision is made.

2. Dissemination of Information During Shareholder Calls or Meetings

The FCA identifies risks arising from communication apps and shareholder meetings, where management statements may inadvertently disclose inside information. Risks include:

• Shareholders perceiving non-sensitive statements as price-sensitive.
• Statements being ambiguous or misunderstood by investors.
• Unintentional breaches of MAR Articles 10 (unlawful disclosure), 14 (prohibition of insider dealing), and 12(1)(c) (market manipulation).

The FCA suggests issuers:

• Consider publishing an announcement summarizing shareholder calls or meetings to confirm no inside information was disclosed.
• Train management to use clear, unambiguous language during these interactions.

The FCA monitors price movements following shareholder calls and may intervene where discussions appear to breach MAR obligations.

3. Dissemination of Regulatory Information During Interruptions to PIP Services

During the Crowdstrike PIP outage in July 2024, issuers mistakenly assumed their announcements were disseminated to the market after submission, leading to unlawful disclosures. The FCA warns that:

• Issuers must confirm that announcements have been successfully disseminated via a PIP before publishing them on other channels, such as their websites.
• Establishing a secondary PIP account is recommended to ensure continuity during service interruptions.

Issuer Actions and FCA Recommendations

To address these issues, the FCA advises issuers to:

1. Establish a disclosure committee responsible for assessing whether information qualifies as inside information and determining the timing of announcements. This includes consulting external counsel where necessary.
2. Ensure that senior management (CFO, CEO, Company Secretary) can release performance-related announcements outside normal reporting times (Market Watch 58).
3. Train employees to recognize inside information and understand disclosure obligations.
4. Properly control and manage inside information to prevent leaks.
5. Document decisions regarding the classification of information as inside or not, ensuring robust audit trails.

Conclusion

The FCA’s PMB 52 underscores the importance of careful, case-by-case analysis and timely disclosures to meet MAR obligations. By implementing the recommended actions, issuers can mitigate risks of non-compliance, enhance transparency, and maintain market integrity. With MAR remaining a focal point for regulatory enforcement, issuers must ensure robust internal processes and proactive communication strategies.