Article 17(4): “General” delay

224. For the delays foreseen under Article 17(4) of MAR, an “ex-post” notification to the competent authority is required to (i) inform about the existence of the delay, and (ii) provide the written explanation on how the conditions for delaying were met. MAR allows the possibility for the explanation to be provided only upon request of the competent authority, if permitted under national law. The draft technical standards to be prepared by ESMA cannot limit or restrict the discretion allowed by the MAR text to Member States in this matter.

225. The notification to the competent authority of the information about the delay and, where relevant, of the explanation, should take place immediately after the delayed inside information has been publicly disclosed. In order for the authority to be quickly informed to conduct any monitoring activity it may wish to do, the notification should be provided by the issuer by the most expeditious means. ESMA also considers that the act of notifying should not be delayed intentionally or negligently, and should be integrated in the issuer’s general process for disclosing inside information.

226. All notifications should always be provided by the issuer to the competent authority in a manner that could be recorded by both the issuer and the competent authority, therefore written notification is considered the standard form. Would national law allow for the explanation about the delay to be provided upon request of the competent authority, the issuer should provide it in writing either together with the information about the delay or at a later stage, after the information about the delay has already been notified. Oral transmission of the fact that the disclosure was delayed is not perceived by ESMA as sufficient since it does not ensure proper record or audit trail of the transmission within the competent authority nor within the issuer. The use of recorded telephone communication is not considered a viable option either, as the explanation of the delay is required in a written form by Article 17(4), and it is not desirable to allow for different means between the explanation piece and the first notification.

227. This general proposal was widely supported by the majority of the respondents to the CP and to the DP.

228. Consequently, ESMA suggests that both the information about the delay and the explanation are provided in written form, using electronic means of transmission accepted by the relevant competent authority, to dedicated contact point(s) within the competent authority. In particular, competent authorities should make clear how the notification process operates on their website and should specify on the same the electronic means to be used by the issuers/EAMPs (see new Article 4(2) of the TS).

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Technical means for the notification

229. For the sake of promoting a harmonised approach to the notification to the competent authorities and to ensure consistency in the information notified by the issuers across Europe, ESMA proposes to specify which information the technical means for notification should be able to include in the notification (see new Article 4(3) of the TS).

230. A distinction should be drawn between the notification of the information about the delay and the related explanation, as they are not necessarily transmitted simultaneously to the relevant competent authority. ESMA is mindful not to overburden issuers with requirements in terms of information to be provided, which should nonetheless be sufficient for the competent authority to conduct any supervisory action and activity needed.

231. With respect to the information about the delay, i.e. the issuer informing that the disclosure of inside information that has just been publicly disclosed was delayed, the CP included a list of items to be included in the notification, which received some suggestions for improvements by the respondents. ESMA is therefore slightly amending one item of the proposal in order to accommodate for some of the comments received while, at the same time, maintaining the effectiveness of the TS. In particular, the CP included in the list of information requested “the identity of the persons having taken part in the decision making process for delaying”. Considering the responses received by market participants, and also the function of the insider list in this context, the TS now specify that, under this item, the identity of “all persons with responsibility for the decision of delaying the public disclosure of inside information” should be included (see new Article 4(3)(f) of the TS).

232. Although ESMA received some comments asking to modify the item “date and time of the decision to delay the disclosure of inside information”, this item remains the same as the one presented in the CP, and it is now included in new Article 4(3)(e). The date and time of the decision of delaying the disclosure of inside information is a critical information to be used in potential investigations regarding the concerned inside information. ESMA therefore does not agree with the proposal of having a flexible approach to this item, as proposed by some respondents, considering that even when the decision is taken during a meeting or during multiple discussions, there is always a moment in time in which the decision is officially taken by the person(s) with the power and responsibilities to do so.

233. Consequently, the list of information ESMA proposes to include in the notification of delay is the following, and remains broadly unchanged from the one of the CP:

a. the identity of the issuer or emission allowance market participant: full legal name;

b. the identity of the person within the issuer making the notification name, surname(s), position within the issuer or emission allowance market participant;

c. the contact details of the person making the notification: professional email address and phone number;

d. identification of the disclosed inside information that was subject to delayed disclosure: title of the disclosure statement; the reference number, when the dissemination system used assigns one; date and time of the public disclosure of the inside information;

e. date and time of the decision to delay the disclosure of inside information;

f. the identity of all persons with responsibilities for the decision of delaying the public disclosure.

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234. Point (b) and (c) in the previous paragraph is of crucial importance to allow a competent authority to directly contact the relevant person in a timely-efficient manner, in cases where the competent authority needs to quickly communicate with her/him.

235. When recording time, the relevant time zone should be specified (for example CET or GMT). “Date and time” items are crucial information and should be as granular as possible, as they could play a decisive role in insider-dealing investigations.

236. Where the explanations are not notified simultaneously by the issuer with the information about the delay, but provided on a later date upon request of the competent authority, it is expected that the above mentioned pieces of information (letters (a) to (f)) are also included in that explanatory notification to avoid any confusion.

237. In addition, the issuer is requested to provide explanation as to how the three conditions of Article 17(5) were met. The CP specified how the three conditions - namely (i) legitimate interest at stake; (ii) omission likely not to mislead the public; and (iii) confidentiality process within the issuer - should be considered in the explanation of the delay (see ex-Article 5(3) of the TS in the CP). In the new version of the TS this paragraph on the “content” of the written notification has been deleted because it was considered a repetition of the obligation already stated in MAR Article 17(4).

Nevertheless, the new ITS foresee that the technical means for delaying the disclosure of inside information should ensure the maintenance of a number of key information, including the initial fulfilment of the conditions for delaying the disclosure and any change of this fulfilment during the delay period (see new Article 4(1) of the new TS, described in the next section of this Report).

238. Finally, as already said in the CP, it should be noted that ESMA has decided not to impose common templates for notification of delays.

Maintenance of information regarding the delay of disclosure

239. MAR specifies that the disclosure is delayed under the issuer’s responsibility. Delays in disclosure of inside information are decided by the issuers themselves. The issuers are therefore expected to have in place a minimum level of organisation and a process to conduct a prior assessment whether an information is an inside information, whether its disclosure needs to be delayed and for how long. There should be person(s) appointed within the issuer responsible for taking such decision. This person(s) should be clearly identified within the issuer and should have the necessary decision-making power (e.g. a managing board member or a senior executive director), considering the major importance of the decision. ESMA does not consider appropriate to specify which positions such person(s) should have within the issuer, considering the variety of organisational structures issuers may have, but the issuer should ensure that a person responsible for the delay is always clearly identified. In addition, before taking a decision allowing the delay of publication of inside information, this person(s) should conduct an assessment on whether the three conditions set forth in Article 17(4) for delaying are fulfilled¹⁴.

14 The three conditions are:

- the immediate disclosure would likely prejudice his legitimate interests;

- the omission would not be likely to mislead the public; and

- the issuer of a financial instrument or emission allowance market participant is able to ensure the confidentiality of that information.

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240. Considering the requirement for the issuer to be able to provide a written explanation concerning the delay, the above mentioned decisions and information should be maintained in a durable medium together with, where needed, the relevant reasons supporting such decisions. Because of the reorganisation of the structure of the TS, it has been included a new provisions related to the maintenance of the key information of the process of delaying in new Article 4(1), while the ex-Article 7 dedicated only to “Record keeping” has been deleted.

241. Similarly, there should also be an assessment conducted within the issuer to put an end to the delay and ensure that the inside information is then publicly disclosed in an appropriate manner. The decision to publish will also trigger the duty to notify the competent authority about the delay and, where relevant, to provide the explanation in writing.

242. Throughout the period of delay, the issuer should ensure that the conditions for the delay are constantly fulfilled, particularly the condition concerning the confidentiality of the delayed inside information. Would the confidentiality be no longer maintained, including due to rumours that are sufficiently accurate to indicate that a leak of information has occurred, and irrespective from where the breach of confidentiality originates, the issuer must publicly disclose this inside information (Article 17(7)). Again, the decision to disclose taken in this context would trigger the duties to notify the competent authority about the delay and where relevant to provide the explanation in writing. Therefore, maintaining evidence of the outcome of the on-going monitoring of the conditions of the delays is needed, as requested by new Article 4(1)(c).

243. Article 17(7) does not mention that the leak of the rumour has to come from the sphere of the issuer in order to trigger the duty to disclose the inside information as soon as possible. If this would be the case, in order to decide whether the disclosure is required or not, an investigation (potentially time-consuming) has to take place to detect the source of leak, whereas Article 17(7) requires disclosure to the public “as soon as possible”.

244. Some respondents to the CP asked ESMA to provide more details on rumour, and in particular on when a rumour should be considered “sufficiently accurate”. ESMA cannot provide more details and explanation on what is meant by the MAR Level 1 in relation to rumour. It should also be reminded that ESMA will issue in the future some Guidelines to establish “a non-exhaustive indicative list of the legitimate interests of issuers, as referred to in Article 17(4)(a), and of situations in which delay of disclosure of inside information is likely to mislead the public as referred to in Article 17(4)(b)”, and in the context of these Guidelines ESMA may be able to provide additional information on what should be considered a rumour under Article 17(7) of MAR.

245. In relation to the “on-going monitoring and records of changes in condition for delays”

(ex-Article 7(1)(b) in the CP), ESMA would like to clarify that, as expressed by some respondents, the requirement is to modify the records of how the required conditions for delay are met only after a change in these conditions, meaning that the record will include only relevant updates. This was explained in the CP and in the draft TS, with both stating that “a new record is needed when there has been a change in the original conditions”. The drafting of this section has been amended in the new TS, which do not include anymore a dedicated article to “Record keeping”, as explained in the next paragraphs.

246. Article 7(1)(a)(i) of the draft TS of the CP required the record keeping of “the date when the inside information came into existence”, and ESMA received some suggestions to redraft this obligation by the respondents. It is important to highlight that the “starting date” of an inside information is a crucial piece of information, and it is necessary in the context of delay of publication of inside information, but also (indirectly) in the context of

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the production of insider list. ESMA is aware that there are some circumstances where the inside information is not generated within the issuer because, for example, the source of it is a public body, such us a prudential supervisor or a patent office. The TS is amended to accommodate for this type of situations (see new Article 4(1)(a), point (i)).

247. Against this background, and taking into account the support received from the majority of the respondents to the CP and the suggestions provided by the same, ESMA has decided to delete the Article dedicated only to record-keeping (ex-Article 7), and to include in new Article 4 on “Notification of delayed disclosure of inside information and written explanation” the information that the technical means for delaying the public disclosure of inside information should be able to maintain in a durable medium. This information is:

a. the dates and times when (i) the inside information first existed within the issuer or emission allowance market participant; (ii) the decision to delay inside information was made; and (iii) the issuer or the EAMP is likely to publish the inside information;

b. the identity of the persons within the issuer or emission allowance market participant responsible for: (i) deciding about the start of the delay and its likely end; (ii) ensuring the on-going monitoring of the conditions for the delay; (iii) deciding about the public disclosure of the inside information; (iv) providing the requested information about the delay and the written explanation to the competent authority;

c. evidence of the initial fulfilment of the conditions referred to in Article 17(4) of Regulation (EU) No 596/2014, and of any change of this fulfilment during the delay period, including: (i) the information barriers which have been put in place internally to prevent access to inside information by persons other than those who require it for the normal exercise of their employment, profession or duties within the issuer or emission allowance market participant, and with regard to third parties; (ii) the arrangements put in place in cases where the confidentiality is no longer ensured.

248. In relation to the ability of the issuer or the EAMP to maintain the confidentiality of the inside information during the delay, ESMA considers that the information barriers in place within the issuer or the EAMP should be effective, though appropriate to the circumstances of the concerned issuer/EAMP as well as to the number of persons involved in the process of delaying inside information. In other words, ESMA considers that the more persons are involved in the process and know about the inside information, the more stringent the information barriers used should be.

249. Similarly to the comments received to the “format and content of the notification”, some respondents asked to change the records related to how confidentiality is ensured, foreseen in Article 7(1)(d) of the TS in the CP, in a way that a general description of the process is considered enough. ESMA is clarifying the TS along the same lines explained in the previous section, meaning that for the maintenance of the information regarding the ability to maintain the confidentiality of the information, a general description of the standard procedure that the issuer has in place to ensure the confidentiality of the inside information is enough, unless a specific procedure (meaning different from the standard one) has been used for the concerned inside information. In this latter case, the maintenance of the information relating to the actual procedure used by the issuer is required (see new Article 4(1)(c)).

Emission Allowance Market Participants

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250. ESMA is of the view that for specifying the technical means for delaying disclosure of inside information related to EAMPs, no argument would support following a different approach than the one proposed for issuers of financial instruments. Thus equivalent requirements and standards should apply.