Jennifer Payne

University of Oxford and ECGI

Disclosure of Inside Information

03/06/2020

The disclosure of inside information is a core component of EU capital market regulation. It underpins the market abuse regime, providing information to investors, and robbing it of its “inside” quality. Different regimes tackle the issue of inside information disclosure in distinct ways. The EU regime of continuous disclosure stands in sharp contrast to the approach adopted in the US and this paper considers the pros and cons of the EU’s approach. This paper argues that the EU provisions are preferable, and are more likely to promote market efficiency, but the EU regime also creates potential dangers and disadvantages for companies who are the subject of the disclosure obligations. Sufficient flexibility is therefore needed to capture the benefits of continuous disclosure without imposing undue burdens on issuers in the process.

I. INTRODUCTION

The EU Market Abuse Regulation (MAR) places an obligation on issuers of financial instruments to disclose inside information to the market ‘as soon as possible’. This must be done in a way that ‘enables fast access and complete, correct and timely assessment of the information by the public.’ The information must be disseminated to the public simultaneously, or as nearly as possible, in all EEA Member States. This obligation is one of the cornerstones of EU securities market regulation.

 

The EU regime, based on the notion of prompt disclosure, suggests that the information does not belong to the issuer at all, but rather that, as a general matter, it can be regarded as belonging to all investors and therefore should be shared with the investing public. This approach is distinct from that of other jurisdictions, most notably the US. In particular the EU regime adopts a concept of continuous disclosure, which is much broader than the obligation to disclose inside information imposed on issuers in the US. Furthermore, the EU regime seeks to achieve two goals via the obligation to disclose inside information, namely to inform investors about the company and its business and also to reduce the opportunities for insider trading by robbing information of its inside character. There is thus a close relationship between the disclosure obligation and the prohibition of insider dealing. This approach is again distinct from that of the US. These differences will be explored in this paper.

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