Inside Information in Protracted Processes after the Listing Act: End of the Story?

The Listing Act marks a significant turning point in the European regulation of inside information by reshaping the treatment of protracted processes under MAR. Moving away from the original framework developed in Geltl v. Daimler, the new regime adopts a clearer two-step model that separates the prohibition of insider dealing from the issuer’s duty of disclosure. While leaving the insider trading ban untouched, for protracted processes the new regime postpones disclosure until the occurrence of the final event. This reform aims to reduce the regulatory burden for listed companies and to reduce disclosure of preliminary information.

Our paper shows, however, that the Listing Act does not fully eliminate legal uncertainty. Although the Commission Delegated Regulation provides a more detailed taxonomy of protracted processes and identifies numerous examples of “final events,” the dividing line separating protracted processes and one-off events is a matter of interpretation and can occasionally raise doubts on its consequences. Following ESMA’s technical advice, the Commission Delegated Regulation confines the concept of protracted processes to developments that depend, at least in part, on the issuer’s own actions or decisions. This criterion leaves some questions concerning the boundaries of the new rules unresolved. One first question relates to the rationale for subjecting disclosure of external developments that evolve progressively over time to the old regime. A second question revolves around the treatment of inside information within corporate groups, including whether events occurring in controlled entities shall be treated as protracted processes or one-off events from the perspective of listed companies. A third question concerns disclosure relating to accounting data revealing profit warnings and earnings surprises.

Overall, the new regime will likely have a positive impact in that it increases certainty concerning the timing of disclosure for protracted processes, including periodic financial reports. However, substantial interpretive discretion remains regarding the treatment of external events, the organisation of internal information systems, and the identification of the corporate actors whose knowledge is attributable to the issuer. The actual impact of the new rules on these matters will, therefore, crucially depend on the interpretation by issuers, supervisors, and ultimately courts.