New Rules on Disclosure of Inside Information, Market Soundings, and Managers' Transactions

Date 8 jun. 2016
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On 3 July 2016 the regulation No. 596/2014 of the European Parliament and the Council Regulation (EU) on market abuse (MAR) definitively enters into force. This involves an amendment to the obligation to disclose inside information. Whereas now, issuers of securities must disclose inside information at the time when the inside information becomes a reality, after 3 July 2016 issuers will be obligated to disclose inside information already at the time when the inside information is available.

Furthermore, the obligation is extended to apply to both issuers admitted for trading on a regulated market as well as multilateral trading facilities, organized trading facilities and emerging markets for small and medium-sized companies.

This article details the definition of inside information, as well as the time when the inside formation must be disclosed after 3 July 2016.

MAR also introduces a new regime for market sounding, including a regulation of disclosure of inside information.

In conclusion, MAR contains provisions on thresholds for the obligation of disclosure of managers’ transactions.


Inside Information

The definition of inside information is essentially maintained from the current rules. Inside information is thus understood as:

  1. specific information, which directly or indirectly concerns one or more issuers or one or more financial instruments;
  2. information which has not been disclosed; and
  3. information which, if disclosed, may have a significant impact on the price of those financial instruments or derived instruments.

If the information relates to a long term process, each step in the process can constitute inside information in itself, provided that such information meets the above criteria, even though the steps are merely temporary. For this reason issuers should for example in contract negations etc. assess whether the negotiations will result in the conclusion of a contract.

Furthermore, MAR clarifies what constitutes inside information in relation to commodity derivatives, as well as individuals whose job is to execute trade orders in financial instruments.

In addition to the above criteria in sections 1-3 there is a further requirement to constitute inside information for commodity derivatives. The information must reasonably be expected to be disclosed or might even be disclosed in accordance with legal or administrative provisions to constitute inside information. These legal or administrative provisions can be a result of EU legislation as well as national rules, contracts or customary practices of the derivatives.

For individuals who are responsible for executing trading orders, inside information constitutes information provided by customers of their pending orders, if such information is accurate and meets the criteria set out in the above sections 1-3. 


Specific knowledge

That knowledge is specific means:

  1. that the information is sufficiently precise so as to draw a conclusion on the specific circumstances or the specific events’ effect on the prices of financial instruments, including derivative instruments; as well as
  2. if the circumstances or the events have already occurred or which may reasonable be expected to occur.

When a circumstance or event may reasonably be expected to occur depends on a specific assessment. Thus, there are no general criteria to assess when this reasonableness exists.

In connection with the reasonableness requirement the European Court of Justice has stated that one must assess the importance of the conditions or events and to assess how likely it is that they are going to occur. In this context there are low requirements for the probability of a given circumstance or event if the circumstance or event is highly noticeable.

Noticeable Effect on the Price

Whether specific information will have a noticeable effect on the price of a financial instrument depends on what a reasonable investor assumedly will base his investment decision on. Thus, if an investor will include the information in its considerations associated with an investment, the specific information will have a noticeable effect on the price.


Disclosure of Inside Information

Where the Securities Trading Act requires that issuers disclose inside information when the information in question becomes a reality, the obligation to disclose inside information occurs as soon as possible. Thus, there is no longer a requirement that information in question must be a reality, but merely a requirement that the inside information must be available.

When the above-mentioned criteria for when there is inside information are met, any issuer must as soon as possible disclose.

The regulation does not specify what as soon as possible actually entails, but in the past there has been a common practice that issuers must be prepared for events that are expected to occur. This requirement is also expected to be continued under the regulation, but since the occurrence of the obligation is moved forward to the moment where the inside information is available, rather than the time where the inside information becomes a reality, it is likely that there will be more and more situations where issuers cannot be as prepared as in the past. However, in the absence of other reference points, it must be concluded that the former practice will continue to apply.


Postponement of Disclosure

As is the case with the current rules, the regulation allows for issuers to delay the disclosure of inside information until the inside information is available provided that certain – cumulative – conditions are met.

An issuer can thus delay the disclosure of inside information provided that:

  1. the immediate disclosure is likely to undermine the issuer’s legitimate interests;
  2. the immediate disclosure is not assumed to cause the public to be misled; and
  3. that the issuer can ensure that the inside information remains confidential.

Postponement takes place at the issuer’s own risk.

The possibility for postponement also applies to market participants in relation to emission quotes.

The possibilities for postponement also apply to long-term processes such as contract negotiations.


The Issuer’s Documentation Requirements

If an issuer chooses to postpone the disclosure of inside information, the issuer must, as long as the postponement of the inside information is ongoing, prepare internal records of the inside information. According to ESMA’s draft of technical standards, which is still missing accession from the Commission, the internal records must contain the following information:

  1. The date and time when the inside information was available to the issuer.
  2. The date and time when the decision on postponement of the disclosure of inside information was taken, including when the issuer expects to disclose the inside information.
  3. The identity of the person(s), who are responsible for the following:
    1. The decision on the postponement of disclosure of inside information;
    2. The ongoing monitoring of the fulfillment of the conditions for the postponement;
    3. To decide whether the inside information must be disclosed;
    4.  To submit the required information and the written statement to the FSA.
  4. Documentation for the fulfilment of the applicable conditions regarding the postponement, including the internal steps to avoid unauthorized access for people who do not have the right to have access to inside information, as well as procedures in cases where the confidentiality of the inside information are no longer met.

Concurrently with disclosure of the inside information, the issuer must notify the FSA that disclosure of the inside information has been postponed. In this connection, the issuer must give detailed information, and the FSA has prepared a notification form which they recommend that issuers use for this purpose. The form is available here (in Danish).


At the FSA’s request, the issuer must submit a statement, in writing, to the FSA giving an account of why the disclosure was postponed and how the conditions for postponement were met1.

The statement must include the date and specific time at which a decision to postpone the disclosure of inside information was taken and the identity of the person who was responsible for the decision of postponing the disclosure.

As a result of these new documentation requirements in connection with postponement of disclosure of inside information, issuers should review their internal policies and make the necessary adjustments to meet the new requirements.

The Issuer’s legitimate Interests

The regulation provides a number of examples of what constitutes a legitimate interest for the issuer. An example of a legitimate interest is the ongoing negotiations where disclosure can affect the result or the ordinary course hereof. This is particularly the case when the issuer’s financial survival is in question.

Similarly, decisions or drawing-up contracts of an issuer’s management body where the commencement of the decision or contract depends on the approval from another of the issuer’s bodies are mentioned. However, this only applies if disclosure of the pending approval will be a danger to the public in that it will not be able to assess the information correctly.

Market Soundings

MAR contains a regime for the so-called market sounding, meaning that information about a transaction is communicated to one or more potential investors prior to disclosure. Such communication is prepared to assess the interest and the terms associated with a possible transaction. Market sounding can be prepared by both the issuer itself and by persons acting on behalf of the issuer.

If an issuer prepares a market sounding, MAR requires that the issuer or the person acting on behalf thereof first estimates whether the sounding will lead to disclosure of inside information.

The issuer must prepare detailed records of the market soundings, including a statement of the assessment on whether there is disclosure of inside information, the conclusions thereof and the rationale for the conclusion. This also applies even if the soundings have not entailed disclosure of inside information.

The statements must be given to the FSA at its request.

Issuers must also draw up procedures for the preparation of market soundings, including procedure to give recipients a number of standard pieces of information and to request the recipients of such standard information.

The issuer or the person acting on behalf of the issuer must obtain the recipients’ consents to receive market soundings as well as inform recipients that they may not use the conveyed information and they are subject to a confidentiality obligation in relation thereto.

ESMA has published a draft of technical standard for the format in which the market soundings must be prepared, including in the case of disclosure of inside information. The issuer or the person acting on behalf of the issuer must draw up records of the prepared market soundings.

The obligations above entail that issuers should review their internal policies for the preparation of market soundings, including the insurance of compliance with the new regulation.

Managers’ Transactions

Reporting Duty

When an issuer’s managers, including their related parties, conduct transactions with the issuer’s stocks, debt instruments or derivatives thereof, and this is done at the managers’ or their related parties own expense, the manager must pursuant to MAR report this to the issuer and the FSA. This report must be made immediately and within three working days after the transaction is concluded.

The reporting duty within MAR occurs when the managers’ or their related parties’ transactions reached a total annually amount of EUR 5,000. With reference to the implementation law, which is still not adopted, the Danish FSA may increase that threshold since MAR allows an increase to the threshold up to EUR 20,000.

The report must contain the following information:

  • The manager or the manager’s related parties’ names;
  • The reason for the reporting;
  • The name of the issuer whose shares, debt instruments or derivatives are traded;
  • A description of the financial instrument that is traded, including price and quantity;
  • Whether it is a question of purchase, sale etc.; and
  • Date and place of the transaction

Furthermore, if appropriate, the following information should be reported:

  • Pledging or lending of the managers’ financial instruments by or on behalf of the manager itself or by a related person hereto;
  • Transactions, made by any person who as part of his/her business organizes or carries out such transactions, or any nother person with managerial responsibilities in relation to the issuer;
  • Transactions made in connection with a life insurance policy

The issuer must then immediately and not later than three days after the transaction is concluded disclose information hereto.

Prohibition on Transactions in closed Periods

MAR introduces a prohibition against managers making transactions with the issuer’s financial instruments in a closed period of 30 calendar days prior to the issuer’s publication of any interim financial report or end-of-term report, which the issuer is obliged to do, either as a result of the applicable provisions on the market in which the issuer’s shares are admitting to trading or as a result of Danish regulation.

However, such transactions may be permitted provided that there are exceptional circumstances in the case under review, including e.g. serious financial difficulties which condition a sale of shares in this period.


Our Assessment

Due to the advance of the obligation to disclose inside information to the time where the inside information is available, issuers should carefully assess when such information is available, including being more aware of the assessment of why conditions and events reasonably may be expected or respectively occur.

In relation to this reasonable assessment, issuers may rightly draw up policies for when they consider circumstances, such as contracts, essential. Such policies will contribute to a common understanding of essentiality on the market and thus contribute in any disputes, even though such policies are not binding for the FSA’s assessment of whether the disclosure of inside information was timely.


1) In continuation of a previously published edition of this news article, it is specified that issuers must only submit a statement to the FSA in connection with postponement of disclosure of inside information provided that the FSA requests it.


If you have any questions or would like additional information regarding the obligation to disclose inside information after 3 July 2016 or the definition of such information, please contact Senior Associate Henning Hedegaard Thomsen ( or Junior Associate Andreas Løndahl Hertel (

The above does not constitute legal counselling and Moalem Weitemeyer Bendtsen does not warrant the accuracy of the information. With the above text, Moalem Weitemeyer Bendtsen has not assumed responsibility of any kind as a consequence of any reader’s use of the above as a basis for decisions or considerations.