DTR 2
Disclosure and control of
inside information by issuers
DTR 2.1
Introduction and purpose
- 01/07/2005
Introduction
DTR 2.1.1
See Notes
An issuer should be aware that matters that
fall within the scope of this chapter may also fall within the scope of:
(1) the market abuse regime set out
in section 118 of the Act;
(2) section 397 of the Act relating to misleading statements and
practices;
(3) Part V of the Criminal Justice
Act 1993 relating to insider dealing; and
(4) the Takeover
Code.
- 01/07/2005
DTR 2.1.2
See Notes
If an issuer is
involved in a matter which also falls within the scope of the Takeover Code it must nevertheless comply
with its obligations under this chapter.
- 01/07/2005
Purpose
DTR 2.1.3
See Notes
The purpose of this chapter is
to:
(1) promote prompt and fair disclosure
of relevant information to the market; and [Note: Recital
24 Market Abuse Directive]
(2) set out specific circumstances
when an issuer can delay public
disclosure of inside information and
requirements to ensure that such information is kept confidential in order
to protect investors and prevent insider dealing. [Note: Recital
5 2003/124/EC]
- 01/07/2005
DTR 2.2
Disclosure of inside information
- 01/07/2005
Requirement to disclose inside information
DTR 2.2.1
See Notes
An issuer must
notify a RIS as soon as possible
of any inside information which
directly concerns the issuer unless DTR 2.5.1 R applies.
[Note: Article 6(1) Market
Abuse Directive]
- 01/07/2005
DTR 2.2.2
See Notes
An issuer will
be deemed to have complied with DTR 2.2.1 R where, upon the coming
into existence of a set of circumstances or the occurrence of an event, albeit
not yet formalised, the issuer notified
a RIS as soon as was possible.
[Note: Article 2(2) 2003/124/EC]
- 01/07/2005
Identifying inside information
DTR 2.2.3
See Notes
Information is inside
information if each of the criteria in the definition of inside information is met.
- 01/07/2005
DTR 2.2.4
See Notes
(1) In determining the likely price
significance of the information an issuer should
assess whether the information in question would be likely to be used by a
reasonable investor as part of the basis of his investment decisions and would
therefore be likely to have a significant effect on the price of the issuer'sfinancial
instruments (the reasonable investor test). [Note: Article
1(2) 2003/124/EC]
(2) In determining whether information
would be likely to have a significant effect on the price of financial instruments, an issuer should
be mindful that there is no figure (percentage change or otherwise) that can
be set for any issuer when determining
what constitutes a significant effect on the price of the financial
instruments as this will vary from issuer to issuer.
- 01/07/2005
DTR 2.2.5
See Notes
The reasonable investor test requires
an issuer:
(1) to take into account that the significance
of the information in question will vary widely from issuer to issuer, depending on a variety of factors
such as the issuer's size, recent
developments and the market sentiment about the issuer and
the sector in which it operates; and
(2) to assume that a reasonable investor
will make investment decisions relating to the relevant financial
instrument to maximise his economic self interest.
- 01/07/2005
DTR 2.2.6
See Notes
It is not possible to prescribe
how the reasonable investor test will apply in all possible situations. Any
assessment should take into consideration the anticipated impact of the information
in light of the totality of the issuer's activities,
the reliability of the source of the information and other market variables
likely to affect the relevant financial instrument in
the given circumstances. However, information which is likely to be considered
relevant to a reasonable investor's decision includes information which affects:
(1) the assets and liabilities of the issuer;
(2) the performance, or the expectation
of the performance, of the issuer's business;
(3) the financial condition of the issuer;
(4) the course of the issuer's business;
(5) major new developments in the business
of the issuer; or
(6) information previously disclosed
to the market. [Note: Recital 1 2003/124/EC]
- 01/07/2005
DTR 2.2.7
See Notes
An issuer and
its advisers are best placed to make an initial assessment of whether particular
information amounts to inside information.
The decision as to whether a piece of information is inside
information may be finely balanced and the issuer (with
the help of its advisers) will need to exercise its judgement.
- 01/07/2005
DTR 2.2.8
See Notes
- 01/07/2005
When to disclose inside information
DTR 2.2.9
See Notes
(1) Subject to the limited ability
to delay release of inside information to
the public provided by DTR 2.5.1 R, an issuer is
required to notify, via a RIS,
all inside information in its
possession as soon as possible.
(2) If an issuer is
faced with an unexpected and significant event, a short delay may be acceptable
if it is necessary to clarify the situation. In such situations a holding
announcement should be used where an issuer believes
that there is a danger of inside information leaking
before the facts and their impact can be confirmed. The holding announcement
should:
(a) detail as much of the subject matter
as possible;
(b) set out the reasons why a fuller
announcement cannot be made; and
(c) include an undertaking to announce
further details as soon as possible.
(3) If an issuer is
unable, or unwilling to make a holding announcement it may be appropriate
for the trading of its financial instruments to
be suspended until the issuer is
in a position to make an announcement.
- 01/07/2005
Communication with third parties
DTR 2.2.10
See Notes
The
FSA
is aware that many issuers provide unpublished information to
third parties such as analysts, employees, credit rating agencies, finance
providers and major shareholders, often in response to queries from such parties.
The fact that information is unpublished does not in itself make it inside information. However, unpublished
information which amounts to inside information is
only permitted to be disclosed in accordance with the disclosure
rules and an issuer must
ensure that at all times it acts in compliance with this chapter.
- 01/07/2005
DTR 2.3
Publication of information on internet site
- 01/07/2005
DTR 2.3.1
See Notes
- 01/07/2005
DTR 2.3.2
See Notes
Inside
information announced via a RIS must
be available on the issuer's internet
site by the close of the business day following
the day of the RIS announcement.
- 01/07/2005
DTR 2.3.3
See Notes
An issuer must
ensure that inside information is
notified to a RIS before, or
simultaneously with, publication of such inside
information on its internet site.
- 01/07/2005
DTR 2.3.4
See Notes
To ensure fast access and correct
and timely assessment of the information by the public, an issuer should
not publish inside information on
its internet site as an alternative to its disclosure via a RIS.
- 01/07/2005
DTR 2.3.5
See Notes
An issuer must,
for a period of one year following publication, post on its internet sites
all inside information that
it is required to disclose via a RIS.
[Note: Article 6(1) Market
Abuse Directive]
- 01/07/2005
DTR 2.4
Equivalent information
- 01/07/2005
DTR 2.4.1
See Notes
Without prejudice to its obligations under DTR 2.2.1 R, an issuer must take reasonable care to ensure that the disclosure of inside information to the public is synchronised as closely as possible in all jurisdictions in which it has:
- (1) financial instruments admitted to trading on a regulated market;
- (2) requested admission to trading of its financial instruments on a regulated market; or
- (3) financial instruments listed on any other overseas stock exchange. [Note: Article 2(4) 2003/124/EC]
- 01/07/2005
DTR 2.4.2
See Notes
If the rules of another regulated market or overseas stock
exchange require an issuer to
disclose inside information at
a time when a RIS is not open
for business it should disclose the information in accordance with DTR 1.3.6 R at
the same time as it is released to the public in the other jurisdiction.
- 01/07/2005
DTR 2.5
Delaying disclosure of inside information
- 01/07/2005
Delaying disclosure
DTR 2.5.1
See Notes
An issuer may,
under its own responsibility, delay the public disclosure of inside information, such as not to prejudice
its legitimate interests provided that:
(1) such omission would not be likely
to mislead the public;
(2) any person receiving
the information owes the issuer a
duty of confidentiality, regardless of whether such duty is based on law,
regulations, articles of association or contract; and
(3) the issuer is
able to ensure the confidentiality of that information. [Note: Article
6(2) and (3) Market Abuse Directive]
- 01/07/2005
Legitimate interests and when delay will not mislead the public
DTR 2.5.2
See Notes
(1) Delaying disclosure of inside information will not always mislead
the public, although a developing situation should be monitored so that if
circumstances change an immediate disclosure can be made.
(2) Investors understand that some
information must be kept confidential until developments are at a stage when
an announcement can be made without prejudicing the legitimate interests of
the issuer.
- 01/07/2005
DTR 2.5.3
See Notes
For the purposes of applying DTR 2.5.1 R,
legitimate interests may, in particular, relate to the following non-exhaustive
circumstances:
(1) negotiations in course, or related
elements where the outcome or normal pattern of those negotiations would be
likely to be affected by public disclosure. In particular, in the event that
the financial viability of the issuer is
in grave and imminent danger, although not within the scope of the applicable
insolvency law, public disclosure of information may be delayed for a limited
period where such a public disclosure would seriously jeopardise the interest
of existing and potential shareholders by undermining the conclusion of specific
negotiations designed to ensure the long term financial recovery of the issuer; or
(2) decisions taken or contracts made
by the management body of an issuer which
need the approval of another body of the issuer in
order to become effective, where the organisation of such an issuer requires the separation between these
bodies, provided that a public disclosure of the information before such approval
together with the simultaneous announcement that this approval is still pending
would jeopardise the correct assessment of the information by the public.
[Note: Article 3(1) 2003/124/EC]
- 01/07/2005
DTR 2.5.4
See Notes
(1)
DTR 2.5.3 R (1) does
not allow an issuer to delay
public disclosure of the fact that it is in financial difficulty or of its
worsening financial condition and is limited to the fact or substance of the
negotiations to deal with such a situation. An issuer cannot
delay disclosure of inside information on
the basis that its position in subsequent negotiations to deal with the situation
will be jeopardised by the disclosure of its financial condition.
(2) The legitimate interest described
in DTR 2.5.3 R (2) refers to an issuer with
a dual board structure (e.g. a management board and supervisory board if and
to the extent that decisions of the management board require ratification
by the supervisory board). An issuer with
a unitary board structure would be unable to take advantage of DTR 2.5.3 R (2) and,
therefore, DTR
2.5.3 R (2) should only be available to a very limited
number of issuers in the United Kingdom.
- 01/07/2005
DTR 2.5.5
See Notes
An issuer should
not be obliged to disclose impending developments that could be jeopardised
by premature disclosure. Whether or not an issuer has
a legitimate interest which would be prejudiced by the disclosure of certain inside information is an assessment which
must be made by the issuer in
the first instance. However, the
FSA
considers that, other than in
relation to impending developments or matters described in DTR 2.5.3 R, there are unlikely to be other circumstances where delay would
be justified.
- 01/07/2005
Selective disclosure
DTR 2.5.6
See Notes
Whenever an issuer or
a person acting on his behalf or for his account discloses any inside information to any third party in
the normal exercise of his employment, profession or duties, the issuer must make complete and effective public
disclosure of that information via a RIS,
simultaneously in the case of an intentional disclosure and as soon as possible
in the case of a non-intentional disclosure, unless DTR 2.5.1 R applies. [Note: Article
6(3) Market Abuse Directive ]
- 01/07/2005
DTR 2.5.7
See Notes
(1) When an issuer is
permitted to delay public disclosure of inside
information in accordance with DTR 2.5.1 R, it may selectively disclose
that information to persons owing
it a duty of confidentiality.
(2) Such selective disclosure may be
made to another person if it
is in the normal course of the exercise of his employment, profession or duties.
However, selective disclosure cannot be made to any person simply
because they owe the issuer a
duty of confidentiality. For example, an issuer contemplating
a major transaction which requires shareholder support or which could significantly
impact its lending arrangements or credit-rating may selectively disclose
details of the proposed transaction to major shareholders, its lenders and/or
credit-rating agency as long as the recipients are bound by a duty of confidentiality.
An issuer may, depending on
the circumstances, be justified in disclosing inside
information to certain categories of recipient in addition to
those employees of the issuer who
require the information to perform their functions. The categories of recipient
include, but are not limited to, the following:
(b)
persons with
whom the issuer is negotiating,
or intends to negotiate, any commercial financial or investment transaction
(including prospective underwriters or placees of the financial
instruments of the issuer);
(c) employee representatives or trade
unions acting on their behalf;
(d) any government department, the
Bank of England, the Competition Commission or any other statutory or regulatory
body or authority;
(e) major shareholders of the issuer;
(f) the issuer's lenders;
and
(g) credit-rating agencies.
- 01/07/2005
DTR 2.5.8
See Notes
Selective disclosure to any or
all of the persons referred
to in DTR 2.5.7 G may not be justified in every circumstance where an issuer delays disclosure in accordance with DTR 2.5.1 R.
- 01/07/2005
DTR 2.5.9
See Notes
An issuer should
bear in mind that the wider the group of recipients of inside
information the greater the likelihood of a leak which will
trigger full public disclosure of the information via a RIS under DTR 2.6.2 R.
- 01/07/2005
DTR 2.6
Control of inside information
- 01/07/2005
Denying access to inside information
DTR 2.6.1
See Notes
An issuer must
establish effective arrangements to deny access to inside
information to persons other
than those who require it for the exercise of their functions within the issuer. [Note: Article
3(2) 2003/124/EC]
- 01/07/2005
Breach of confidentiality
DTR 2.6.2
See Notes
An issuer must
have in place measures which enable public disclosure to be made via a RIS as soon as possible in case the issuer is not able to ensure the confidentiality
of the relevant inside information.
[Note: Article 3(2) 2003/124/EC]
- 01/07/2005
DTR 2.6.3
See Notes
If an issuer is
relying on DTR 2.5.1 R to delay the disclosure of inside
information it should prepare a holding announcement to be disclosed
in the event of an actual or likely breach of confidence. Such a holding announcement
should include the details set out in DTR 2.2.9 G (2).
- 01/07/2005
DTR 2.6.4
See Notes
We recognise that an issuer may not be responsible for breach
of DTR 2.5.1 R if a recipient of inside information under DTR 2.5.1 R breaches his duty of confidentiality.
- 01/07/2005
DTR 2.7
Dealing with rumours
- 01/07/2005
DTR 2.7.1
See Notes
Where there is press speculation
or market rumour regarding an issuer,
the issuer should assess whether
a disclosure obligation arises under DTR 2.2.1 R. To do this an issuer will need to carefully assess whether
the speculation or rumour has given rise to a situation where the issuer has inside
information.
- 01/07/2005
DTR 2.7.2
See Notes
(1) Where press speculation or a market
rumour is largely accurate and the information underlying the rumour is inside information then it is likely that
the issuer can no longer delay
disclosure in accordance with DTR 2.5.1 R as it is no longer able
to ensure the confidentiality of the inside
information.
(2) An issuer that
finds itself in the circumstances described in paragraph (1) should disclose
the inside information in accordance
with DTR 2.6.2 R as soon as possible.
- 01/07/2005
DTR 2.7.3
See Notes
The knowledge that press speculation
or market rumour is false is not likely to amount to inside
information. Even if it does amount to inside
information, the
FSA
expects that in most of those
cases an issuer would be able
to delay disclosure (often indefinitely) in accordance with DTR 2.5.1 R.
- 01/07/2005
DTR 2.8
Insider lists
- 01/07/2005
Requirement to draw up insider lists
DTR 2.8.1
See Notes
An issuer must
ensure that it and persons acting
on its behalf or on its account draw up a list of those persons working
for them, under a contract of employment or otherwise, who have access to inside information relating directly or
indirectly to the issuer, whether
on a regular or occasional basis. [Note: Article
6(3) Market Abuse Directive]
- 01/07/2005
Providing insider lists to the FSA on request
DTR 2.8.2
See Notes
If so requested, an issuer must
provide to the
FSA
as soon as possible an insider list that has been drawn up in accordance
with DTR 2.8.1 R. [Note: Article 6(3) Market Abuse Directive]
- 01/07/2005
Contents of insider lists
DTR 2.8.3
See Notes
Every insider
list must contain the following information:
- 01/07/2005
Maintenance of insider lists
DTR 2.8.4
See Notes
An insider
list must be promptly updated:
(1) when there is a change in the reason
why a person is already on the
list;
(2) when any person who
is not already on the list is provided with access to inside
information; and
(3) to indicate the date on which a person already on the list no longer has
access to inside information.
[Note: Article 5(3) 2004/72/EC]
- 01/07/2005
DTR 2.8.5
See Notes
An issuer must
ensure that every insider list prepared
by it or by persons acting on
its account or on its behalf is kept for at least five years from the date
on which it is drawn up or updated, whichever is the latest. [Note: Article
5(4) 2004/72/EC]
- 01/07/2005
DTR 2.8.6
See Notes
An issuer and
not its advisers or agents is ultimately responsible for the maintenance of insider lists.
- 01/07/2005
DTR 2.8.7
See Notes
For the purposes of DTR 2.8.1 R an issuer should maintain a list of:
(1) its own employees that have access
to inside information;
(2) its principal contacts at any other
firm or company acting on its
behalf or on its account with whom it has had direct contact and who also
have access to inside information about
it.
- 01/07/2005
DTR 2.8.8
See Notes
For the purposes of DTR 2.8.1 R it
is not necessary for an issuer to
maintain a list of all the individuals working for another firm or company acting on its behalf or its account
where it has:
(1) recorded the name of the principal
contact(s) at that firm or company;
(2) made effective arrangements, which
are likely to be based in contract, for that firm or company to
maintain (as set out in DTR
2.8.1 R, DTR 2.8.3 R - DTR 2.8.5 R and DTR 2.8.10 R) its own list of persons both
acting on behalf of the issuer and
with access to inside information on
the issuer; and
- 01/07/2005
Acknowledgement of legal and regulatory duties
DTR 2.8.9
See Notes
An issuer must
take the necessary measures to ensure that its employees with access to inside information acknowledge the legal
and regulatory duties entailed (including dealing restrictions in relation
to the issuer'sfinancial instruments) and are aware of
the sanctions attaching to the misuse or improper circulation of such information.
[Note: Article 5(5) 2004/72/EC and Article
3(2) 2003/124/EC]
- 01/07/2005
DTR 2.8.10
See Notes
An issuer must
ensure that any person that:
(1) is acting on its behalf or on its
account; and
has taken the necessary measures
to ensure that every person whose
name is on the insider list acknowledges
the legal and regulatory duties entailed and is aware of the sanctions attaching
to the misuse or improper circulation of such information. [Note: Article
5(5) 2004/72/EC]- 01/07/2005