Investor Relations - A Practical Guide - Investis

Usually a company will look to a combination of its
legal adviser, to ensure that it complies with the
necessary regulations, its broker and corporate
finance adviser, to assess the significant price
effect test (which, for the avoidance of doubt, is
not reliant on any specific percentage movement in
price), as well as the input of a financial PR firm so
that any announcement is properly structured for
the investor audience. With respect to AIM
companies (see further below), all such
considerations must be made in conjunction with a
company’s Nominated Adviser.
Certain rumours or speculation circulating in the
market or the press may prompt the company to
consider whether such information is inside
information. The flowchart overleaf should be
followed in each case but, in general, if the rumour
is accurate and is inside information, an immediate
announcement will be required. If the rumour is
false, then the company may choose to delay
disclosure, probably indefinitely. There is no
obligation to respond to a false rumour, although a
company may wish to correct significant errors
where they lead to general market misapprehension
or the market being misled.
For further help on the subject, the Committee of
European Securities Regulators (“CESR”) has
published guidance in which it considers what
constitutes inside information and provides
additional clarification on the terms ‘precise nature’
and ‘significant price effect.’ In addition, there is a
(non-exhaustive) list of the types of event or
information which may constitute inside
information, ranging from changes in management
or control of a company to a projected withdrawal
from or entry into a new core business area.
When to announce
Once a company decides that there is inside
information, the general rule is to disclose this to
the market without delay.
The UKLA has previously made it clear that there
is no reason to delay disclosure either due to a
lack of formal Board approval or in order to
arrange a parallel event, such as an associated
webcast. Similarly, the practice of delaying an
announcement until the formal regulatory
information channels (see further below) are
closed and then feeding an exclusive to a
newspaper over the weekend for enhanced
coverage (sometimes known as ‘the Friday night
drop’) is also unacceptable.
Nevertheless, the disclosure regime does permit a
company (under its own responsibility) to delay
disclosure of inside information. For example, if an
unexpected and significant event occurs about
which the company needs more information in
order to make any announcement meaningful, a
short delay is acceptable. However, if there is
danger of a leak before the impact of the relevant
circumstances can be confirmed, the company
should put out a holding announcement while the
issue is investigated. Failure to make such a
holding announcement may result in the company’s
trading being suspended.
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