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Information related to investments, expenditures, and prices in general is quite sensitive. An investor needs to possess all the relevant information about a certain company’s assets before purchasing its shares. The purchase of shares or securities requires ad hoc disclosure, which is essential in the course of satisfying the public interests and prevention of any frauds by an issuer (Ashurst 2005). The law requires that before declaring any sale of shares, disclosure of all price-sensitive information has to take place, and all transactions must be delayed until all the relevant information has been provided.
The Rationale of Ad Hoc Disclosure
Before conducting certain business activities, companies must disclose their inside information to the public. These cases apply both to regulated companies and those involved in multilateral services. Previous laws required companies to disclose only factual information, but the recently updated law requires them to disclose more data (Linklaters 2005). They have to provide even inside information about the board of management decisions and transactions that may affect the price of their offerings. They need to disclose all these issues because the public needs to be aware of all company’s proceedings.
According to Linklaters (2005), “The Investor Protection Enhancement Act demands that the issuer discloses all the information they have in possession and may be helpful to the client decision-making processes.” Therefore, an issuer needs to disclose all relevant inside information to investors since they may have interest in certain aspects of a company, such as the prices and levels of their assets, liabilities, etc. Before, during, and after investing, clients require to test the performance of their company, and most of them need to know about its financial position. As companies develop and grow in value, stakeholders have to be updated on the company’s level of performance (Slaughter and May 2011). Consequently, to be aware of the real value of a company’s securities, price-sensitive information needs disclosure.
Cases Under Which a Company May Delay Ad Hoc Disclosure
According to the Market Abuse Directive (MAD), there are certain cases under which ad hoc disclosure may be delayed. Therefore, an issuer of securities needs to have control over the information released and ensure that it will not mislead any party (Financial Conduct Authority 2015). The Market Abuse Regulation (MAR) and UK law provide the following reasons for delay in disclosure.
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If the omission of certain information is not likely to mislead the public, an issuer can delay disclosure. This regulation takes into consideration the materiality of the information and how well it may be used in decision-making by any of the stakeholders involved in the securities dealings. There is information that does not have much weight in the decision-making processes (“Publication of the EU Market Abuse Regulation” 2014). Thus, a company may withhold this information as investors continue to subscribe to securities without causing harm.
If a company can ensure its confidentiality, it can delay disclosure without affecting market perpetrators. For example, there are companies with different boards that require time to harmonize their decisions and make steps. In such a case, a delay may be appropriate. Further, a person who is supposed to receive inside information may owe a certain level of confidentiality to a company (Slaughter and May 2011). In this case, the law permits an issuer to delay disclosure as the arrangement of the necessary procedures takes place.
Finally, a company may delay disclosure if it has legitimate interests which it is obliged to protect. However, these obligations must be clarified and interests weighted before deciding whether disclosure may be delayed.
Before performing certain business actions, companies are obliged to disclose inside information to the public. This step is necessary to make sure that potential clients are aware of the risks involved and that the process of conducting business is transparent. According to MAR and UK law, companies are allowed to delay disclosure if the information they are about to disclose has little value, if a certain level of confidentiality is involved, if a company requires time to harmonize decisions, or if it is obliged to protect certain data.