Newsletter for primary market participants
March 2025 / No. 54
Strategic leaks and unlawful disclosure
We have seen an increase in instances where material information on live M&A transactions appears to have been deliberately leaked to the press. Examples include details of discussions between the board of an offeree company and a potential offeror following an approach for a possible offer, or where the offeree board has rejected an approach but an increased offer is likely. In many cases, the information leaked constituted inside information under article 7 of the UK Market Abuse Regulation (UK MAR) and resulted in a significant effect on the share price of the offeree company and/or the offeror.
We are concerned leaks which occur inadvertently, by hinting at market sensitive information (even if specific details are not mentioned). And by strategic leaks where inside information is deliberately given to the press by individuals at an issuer or its advisers. These leaks can cause significant movement in share prices and trigger the improper dissemination of information, damaging the smooth operation and integrity of markets.
What is unlawful disclosure?
Article 14 of UK MAR expressly prohibits the unlawful disclosure of inside information by stating that: 'A person shall not… unlawfully disclose inside information’.
Article 10 of UK MAR defines ‘unlawful disclosure’ as ‘… where a person possesses inside information and discloses that information to any other person, except where the disclosure is made in the normal exercise of an employment, a profession or duties’.
Article 14 of UK MAR applies to individuals regardless of whether they are employed by a regulated firm or issuer.
For breaches of UK MAR, the FCA can impose unlimited fines, order injunctions, or prohibit regulated firms or approved persons.
We remind regulated firms and individuals of their obligations under the FCA’s Code of Conduct Rules. In particular, COCON 2.1 requires that individuals must act with integrity and observe proper standards of market conduct.
Responsibilities of issuers and advisers
We have previously communicated best practice in mitigating unlawful disclosure and limiting market abuse in PMB 42 and PMB 52. We reiterate that individuals directly involved in transactions appear to be handling inside information poorly and taking inadequate action to prevent leaks. We are also concerned that a culture may have developed among market participants where strategically leaking inside information to the media is acceptable during a transaction. Anyone unlawfully disclosing inside information, deliberately or otherwise, risks being investigated for market abuse.
Firms can mitigate reputational and professional risk by taking precautions when dealing with inside information and adopting a firm stance to combat any form of unlawful disclosure. Written policies and procedures for identifying and handling inside information can have limited effectiveness if they are not accompanied by culture and practices which actively discourage leaks.
We also remind issuers and advisers of Rule 2.1(a) of the Takeover Code which states that ‘Prior to the announcement of an offer or possible offer, all persons privy to confidential information, and particularly price-sensitive information, concerning the offer or possible offer must treat that information as secret and may only pass it to another person if it is necessary to do so and if that person is made aware of the need for secrecy. All such persons must conduct themselves so as to minimise the chances of any leak of information.’
Enhancing the National Storage Mechanism
We have published Policy Statement PS24/19, summarising feedback to our consultation on the National Storage Mechanism and, where appropriate, setting out our response. It also includes our final rules and guidance. The rule changes will come into force on 3 November 2025.
Chapter 3 of the Policy Statement explains the new metadata requirements for issuers. We will cover these in more detail in a future Primary Market Bulletin.
March Quarterly Consultation Paper (March QCP)
On 7 March 2025 we published the 47th Quarterly Consultation Paper (CP25/4). This includes, in Chapter 5, a proposed amendment to the rules around relevant related party transactions in UKLR 11. We propose amending UKLR 11.5.5R to include a requirement from the old Listing Rules (LR 11.1.7R(4)) which has the effect of requiring the company to exclude the related party and their associates from voting on the shareholder resolution on the transaction. We omitted to carry this element of the rule forward into the UKLR, although we had intended to retain it. The consultation period for the March QCP runs until 14 April 2025.