Regulatory Disclosure: Transparency Directive & MAR Article 17

The unlawful disclosure of inside information can lead to insider trading, where individuals profit by gaining an unfair advantage over the market. To prevent this from occurring, there are legal obligations in place in the European Union for issuers. The public disclosure of insider information is regulated to ensure that the market is informed as soon as possible and the news is delivered simultaneously to all stakeholders.  

Article 21 of the Transparency Directive and Article 17 of the Market Abuse Regulation (MAR) both create a framework outlining the responsibilities of issuers regarding the disclosure of regulatory information. Each member state is able to customise the process of disclosure within its borders. 

MAR focuses on inside information, which is defined as:  

• Non-public 

• Of a precise nature 

• Relating to a financial instrument 

• Likely to have a significant effect on the price of that instrument should it be made public.  

In other words, a reasonable investor would be likely to use such information to make investment decisions if they were to access it.  

The Transparency Directive deals with the dissemination of a range of regulatory information, such as financial reporting, information on major holdings, voting rights and details on changes in capital structure.  

Regulators want to ensure that the market is fully informed at all times with regards to news from issuers. Where there is a gap in knowledge, it can affect the integrity of the market and lead to misconduct. In the case of a European biotech company in the late 2010s, it twice failed to disclose information regarding its failure to gain permission to market its flagship drug for additional ailments. As a result, an insider unlawfully disclosed the information to an investor who divested in the company, knowing that the share price would drop when the news became public. The company received a €1 million sanction for failing to disclose the information.  

This article explores the framework created by the two pieces of legislation and includes advice on best practices for distributing regulatory news. It also explains how the process works in Sweden.  

2. Understanding regulatory disclosure 

Here are the key elements regarding regulatory disclosure in both the Transparency Directive and Market Abuse Regulation:  

3. How to distribute regulatory news across markets

3.1. Identify the need for disclosure

The first step is to ascertain whether you need to make a disclosure. The Transparency Directive requires issuers to report news on business performance and assets in a timely manner. This includes half-year and annual financial reports, changes to major shareholding information, changes to the board or senior management, capital changes, inside information, corporate events such as mergers and acquisitions and dividend announcements. If the information relates to any of these elements, you need to disclose it to the OAM and the market in general.  

MAR Article 17 relates to inside information. If the information that arises does not meet the threshold for inside information, it does not need to be disclosed immediately, so the first step should be to ensure that it is non-public, precise and likely to affect the price of a financial instrument if disclosed. You should conduct this assessment against the requirements of MAR as soon as possible so that you can make the disclosure promptly if it does constitute inside information.  

It is a challenge to identify inside information, but there are certain trigger events that are likely to generate it, as defined by European law. This will help with making the identification more streamlined. They include financial results that are significantly better or worse than anticipated, changes in management and mergers and acquisitions.  

3.2. Draft the announcement

With the need to make your disclosures in a timely manner, using standardised templates will help ensure they are consistent in formatting, contain all of the necessary information for compliance and meet your regulatory requirements. You do not need to start from scratch each time, but merely enter the information into the template and ensure you meet your obligations.  

Check that you include all the necessary information in your disclosures. For example, in Sweden, FI states that, for disclosures of inside information, you should include: 

• A note to indicate that the release contains inside information in accordance with MAR 

• The identity of the organisation 

• The identity of the person making the report, including their full name and position in the company 

• The subject matter of the inside information 
• The date and time the communication was made.  

Finally, double-check that the information in your disclosure is accurate and clear. The language should be precise so that there is no confusion over the meaning and there should be no errors that might lead to misinterpretation.  

3.3 Internal review and approval process

Develop a process to review the information within the company and ensure that the news release covers all the information you must disclose and in the correct manner. Liaise with other departments that may have a stake in the release, such as investor relations and legal teams. Share the draft and ask for their review and input into the final document.  

Within this process, designate a senior figure or figures to give final approval before you distribute the information.  

3.4. Disseminate the announcement

It is important that all relevant parties receive the information as soon as possible and, in the case of the Transparency Directive, “on a non-discriminatory basis.” This means that the whole market should be able to access the details at the same time, which is also important for disclosing inside information under MAR. 

To achieve this, add the information to your IR website, inform stock exchanges, conduct the required declaration to national competent authorities and regulators and send a press release to the industry press. Disclosures under the Transparency Act should be made to the OAM. 

It is also a good idea to create a contact list of parties to be informed, such as investors, analysts and other stakeholders. The idea is to create a fair market where all stakeholders have the same knowledge and can make investment decisions based on the correct information.  

3.5. Language requirements and multi-market distribution

Each country has its own rules of the precise details of how to make disclosures. In general, it makes sense to distribute the information in the native languages of the countries in which you operate as well as in English to allow for the wider understanding of that information. Where you have overseas investors or potential investors, this would be beneficial in enabling them to understand fully what the disclosure represents.  

Ensure that you are aware of the market-specific versions of disclosure requirements in the jurisdictions where you operate in order to remain compliant.  

3.6. Maintain an audit trail

Companies should keep the information on their website for a minimum of five years. However, it is also advisable to store detailed records of the entire disclosure process for each piece of information you share. This helps you prove that you have made every effort to meet the requirements of both pieces of legislation.  

Keep drafts, approvals, communication logs and other documents relating to your disclosures. In the case of an investigation, this will be useful evidence of your compliance.  

4. A closer look at Sweden: Regulatory news distribution 

The Market Abuse Regulation is transposed into Swedish law, with the FI monitoring the internal market to ensure that companies remain compliant.  

The Transparency Directive has been transposed into two different acts within Sweden. These are the Securities Market Act (Lag om värdepappersmarknaden) and the Financial Instruments Trading Act (Lag om handel med finansiella instrument).  

Here’s how they relate to the requirements for issuers in Sweden: 

In Sweden, issuers must publish these regulatory disclosures in Swedish and, in some circumstances, English. The FI’s stock exchange information database acts as Sweden’s OAM. Issuers should report regulatory information to the OAM at the same time as they disclose it to the wider market.  

5. FAQ 

5.1 What is the role of an Officially Appointed Mechanism (OAM) in regulatory news distribution? 

Officially Appointed Mechanisms (OAMs) are platforms designated by EU member states to ensure that regulated information is stored and disseminated uniformly. They play a crucial role in making sure that all investors have equal access to important corporate information without any bias or delay.   

5.2 Can companies delay the disclosure of inside information under MAR Article 17? 

Yes, under specific conditions, companies can delay the disclosure of inside information if they believe that immediate disclosure would harm their legitimate interests, provided that the delay would not mislead the public and that the information can be kept confidential. However, companies must inform the relevant authorities of the delay and justify their decision once the information is eventually disclosed. 

5.3 What are the key differences between voluntary and mandatory disclosures? 

Mandatory disclosures are required by law or regulation, such as financial statements, material events or significant changes in ownership. Voluntary disclosures are those that companies choose to share, often to enhance transparency or improve investor relations, such as sustainability reports, market outlooks or strategic initiatives. 

6. Conclusion

Both the Transparency Directive and MAR Article 17 require issuers to make disclosures to the market and to regulators within a short timeframe. This can be a challenging process for businesses, particularly when they have to ensure that all parties receive the same information at the same time to ensure fairness in the markets.  

To streamline this process, EuroStockNews is an intuitive tool that helps you reach all of your stakeholders with your regulatory announcements through a single platform. Simply create your release and simultaneously reach your regulator, stock exchange, email contact list and your IR website with just a few clicks. The tool ensures full compliance with both EU laws and local legislation, too. Request a demo today.  

7. References and further reading

• Latest amendments to the Transparency Directive 

• Reporting to FI 

• MAR and MiFID II compliance 

• Market abuse monitoring 

• Finansinspektionen website