On 29th May 2024, the European Securities and Markets Authority (“ESMA”) issued a statement relating to the applicable requirements and corresponding good practices for issuers to consider when engaging in pre-close calls sessions with financial analysts in light of the Market Abuse Regulation (“MAR”).

Background

Pre-close calls refer to communication and information sessions between representatives of an issuer and financial analysts who prepare research notes and projections on the issuer’s financial instruments, and ultimately provide recommendations based on the research conducted. These sessions take place prior to the issuance of an interim report or financial year-end report, during which issuers avoid divulging any price-sensitive information.

Share prices’ fluctuations

In the statement issued, it is noted that both ESMA and other national competent authorities (“NCAs”) have linked share prices’ fluctuations with sessions relating to pre-close calls, specifically, share price volatilities occurring following pre-close call sessions. In this respect, ESMA recommends issuers to follow good practices when conducting such pre-close calls with analysts to ensure that public disclosure of inside information takes place in line with Article 17 of MAR.

Good practices

Issuers are being recommended to apply the following practices when involved in pre-close call sessions to mitigate risks relating to disclosures of inside information.

    1. Undertaking thorough analysis and assessments on the information to be disclosed during pre-close call sessions to ensure that this does not include elements of price-sensitive information;
    2. Disclose publicly (for e.g., on the issuer’s website) information on the upcoming pre-close call sessions, with sufficient notice, including the details, date, place, and topics to be discussed during the sessions, as well as the intended participants;
    3. Publish and make available on the issuer’s website, (i) the material and documentation used during the pre-close call sessions (e.g., slides and notes, including macroeconomic data shared with participants), and (ii) the information discussed during sessions, to enable such information to be available to the public at large; and
    4. Retain on record, (i) information disclosed during the pre-close call sessions; (ii) minutes relating to meetings (if held in person); and (iii) other online meeting(s) recordings (if held remotely), all relating to pre-close call sessions to make them available to NCA(s) upon request.

Moving Forward

Issuers should ensure that discussions during pre-close call sessions only include information that is not price sensitive not to influence markets and investors’ expectations and ultimately prices of financial instruments.

In cases where inside information is accidently provided throughout a pre-close call session, issuers should promptly restore the information parity by immediately publishing that inside information (in line with Article 17(8) of MAR and Chapter II of Commission Implementing Regulation (EU) 2016/1055).

Furthermore, if during a pre-close call session, persons receive inside information, they will be inevitably subject to the prohibitions relating to insider dealing and unlawful disclosure of inside information. In such cases, ESMA recommends that such persons report the case to the relevant NCA(s) promptly, and without delay. Locally, such cases should be reported to the Malta Financial Services Authority.

Author: Beppe Degiorgio, Jonathan Camilleri

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