New restrictive Danish interpretation of insider rules
It is the Danish FSA's interpretation of the Market Abuse Regulation that an issuer shall draw up an insider list in all cases where an issuer comes into possession of inside information - and not only when disclosure of the inside information is ls delayed. This is informed by the Danish FSA in a new memo.
Shortly before Christmas, the Danish FSA published a memo entitled "Insiderlister og de typiske fejl" (Insider lists and the typical errors). Apart from describing typical errors found by the Danish FSA in their review of insider lists prepared by issuers and their advisors, the memo also includes the Danish FSA's interpretation of certain rules on insider lists.
It is of particular interest that it is apparently the Danish FSA's interpretation that issuers shall also draw up an insider list in cases where inside information is not delayed but where it, on the other hand, is disclosed as soon as possible pursuant to Article 17(1) of the Market Abuse Regulation.
In Plesner's opinion, the legal position is unclear in this respect. For example, in connection with a representation to ESMA in 2015, Securities and Markets Stakeholder Group stated that an issuer was only under an obligation to draw up an insider list (i) in the event of delay pursuant to Article 17(4) of the Market Abuse Regulation, or (ii) if the inside information does not directly concern the issuer - and thus does not trigger duty of disclosure pursuant to Article 17(1) of the Market Abuse Regulation. The mentioned interpretation is thus less restrictive than the interpretation applied by the Danish FSA.
The interpretation of the Danish FSA will therefore impose further burdens on the issuers and their advisors in connection with drawing up insider lists. In practice, it is furthermore difficult to see the purpose of drawing up an insider list in a situation where the issuer is under an obligation to disclose inside information as soon as possible, and where the issuer will probably thus only possess inside information for a very brief period, cf. the Danish FSA restrictive interpretation of the concept "as soon as possible".
In the opinion of Plesner, the Danish FSA's interpretation may also involve a risk that inside information in certain situations is disclosed later than what is the case today, as the issuers may find that the Danish FSA has now eased their restrictive interpretation of the concept "as soon as possible" (which is not the case).
The reason given by the Danish FSA for its interpretation is that in practice, there will be a risk of insider dealing and unlawful disclosure of inside information in the period between inside information arising and the fastest possible disclosure hereof, and that the drawing up of insider lists, even in the short period, will therefore benefit the Danish FSA and allow the Danish FSA to make possible enquiries.
In itself, the insider list cannot prevent insider dealing or disclosure but only inform employees that it is a case of inside information. The prohibitions will, however, apply whether or not an insider list exists.
Furthermore, it should be remembered that a number of persons, who may be in possession of inside information, in principle will still not be under an obligation to keep insider lists, e.g. offerors in a takeover bid, major shareholders and public authorities.
As far as we know, ESMA has not addressed this issue. A final settlement of the issue comes within the jurisdiction of the courts, including the Court of Justice of the European Union. Plesner will, directly or indirectly, try to raise the matter with the Danish FSA.
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