Market Abuse

Question 1

which are the rules on insider information disclosure?

Answer 1

An issuer shall inform the public as soon as possible of inside information which directly concerns the said issuer.

he should do so in a way that ensures fast, complete, correct an timely access for the public. (a mere press announcement might not be enough)

he can’t combine the announcement with marketing activities and must keep the insider info posted on his website for 5 years.

Question 2

what is insider information?

Answer 2

information
1) of a precise nature
2) is not public
3) directly or indirectly concerns the issuer/security
4) if made public would significantly affect the price (information a reasonable
investor would be likely to use as part of the basis of his investment decisions)

Question 3

what does “of precise nature” mean?

Answer 3

info that
1) indicates real or probable circumstances / an occurred or likely to occur event.
2) specific enough to allow a conclusion to be drawn on the effect that such event/circumstance will have on price.

Question 4

Are information gathered during negotiations considerable of precise nature?

Answer 4

yes, as a consequence an intermediate step in a negotiation may fit the definition of insider information.

Question 5

in which cases is an information specific enough to allow for a conclusion to be drawn on price?

Answer 5

• when it prompts traders to buy/sell said security with little to no financial risk (implying they know where the price will go)
• when the piece of info is likely to stir immediate trading on its basis when it becomes public

The assessment must happen ex-ante!!

Question 6

in which cases is a credit institution exempt from immediate disclosure requirement?

Answer 6

a credit institution which is facing liquidity issues may delay public disclosure if:
1) disclosure might threaten the stability of the issuer and the financial system
2) it is in the public interest to delay disclosure
3) confidentiality of the information can be otherwise ensured
4) the competent authority reviews and approves all previous points

Question 7

when is a normal institution allowed to delay disclosure of insider information?

Answer 7

an institution might delay disclosure if:
1) immediate disclosure might harm its legitimate interest
2) delay of disclosure will not mislead the public
3) the issuer can ensure confidentiality
The delay ends whenever confidentiality is not ensured anymore–> a sufficiently credibile rumor starts to spread about the info, the issuer must disclose

Question 8

what are legitimate interests of the issuer (whose potential harm allows him to delay disclosure)?

Answer 8

-the issuer is conducting negotiation and disclosing intermediate steps coul hurt the result
- financial viability of the issuer is in grave danger and disclosing could kill any recovery plan
- a decision body of the issuer must approve a decision /sign a contract already approved by management, provided that early disclosure could warp the perception of the public and the final decision is scheduled to be taken asap.

Question 9

in which situations is the delay of disclosure of insider information likely to misguide the public?

Answer 9

• the information greatly changes the outlook or meaning of a previous statement of the issuer
• the information relates to missing financial targets previously announced
• the info is in contrast with market expectations based on signals given by the issuer himself

Question 10

what happens if an issuer discloses insider info to a third party?

Answer 10

he should make
-simultaneous disclosure if the deed was intentional
- prompt disclosure if the deed was unintentional

no need for immediate disclosure if the third party has a duty of confidentiality.