MKT 3.5 MKT 3.5 Market disclosure relating to a Listed Fund
Disclosure of Inside Information
MKT 3.5.1 MKT 3.5.1(1) A Reporting Entity of a Listed Fund must:(a) make timely disclosure of Inside Information in accordance with the requirements in this section; and(b) ensure that the disclosure it makes pursuant to (a) is not false, misleading, or deceptive and does not omit anything likely to affect the import of the information.
Guidance1. A Reporting Entity of a Listed Fund is required to disclose Inside Information relating to the Listed Fund to the market as soon as possible in accordance with the requirements in Rule 3.9. In practice, a short period before announcing Inside Information is permitted where a Reporting Entity is affected by an unexpected event and the Reporting Entity needs to clarify the situation or take legal advice so that any information released is accurate and not false, misleading, or deceptive. Any delay should be limited to a period no longer than is reasonably necessary in the circumstances. Where there is a danger of the information leaking out in the meantime, the Reporting Entity should make a holding announcement giving an outline of the subject matter of the announcement, the reasons why a full announcement cannot yet be made and undertaking to make a full announcement as soon as possible.2. For the disclosure to be not false, misleading, or deceptive, a Reporting Entity of a Listed Fund should provide information that is accurate, factual and complete. Any incomplete or inaccurate information, such as omission of relevant information, may be false, misleading, and/or deceptive. Information should be provided in an easy to understand manner and not for promotional purposes. The use of imprecise and confusing language such as "double digit" or "in excess of last year" should be avoided as it does not allow investors to properly assess the information for the purpose of making an informed decision relating to the Relevant Securities.3. A confidentiality agreement cannot prevent a Reporting Entity from complying with its obligations relating to the disclosure of Inside Information.4. If, for any reason, a Reporting Entity of a Listed Fund is unable, or unwilling to make a holding announcement it may be appropriate for the Reporting Entity to file a report pursuant to Rule 3.5.4(2) and for the trading of Units to be suspended until the Reporting Entity of the Listed Fund is in a position to make an announcement.
Identifying Inside Information relating to a Listed Fund5. Inside Information is defined in sections 95(2), (3) and (4) of the FSMR as:"(2) In relation to Financial Instruments, or Related Instruments, which are not Commodity Derivatives, Inside Information is information of a Precise nature which:(a) is not generally available;(b) relates, directly or indirectly, to one or more Issuers of the Financial Instruments or to one or more of the Financial Instrument; and(c) would, if generally available, be likely to have a significant effect on the price of the Financial Instruments or on the price of Related Instruments.(3) In relation to Financial Instruments or Related Instruments which are Commodity Derivatives, Inside Information is information of a Precise nature which-(a) is not generally available;(b) relates, directly or indirectly, to one or more such derivatives; and(c) users of markets on which the derivatives are traded would expect to receive in accordance with any Accepted Market Practices on those markets.(4) In relation to a person charged with the execution of orders concerning any Financial Instruments or Related Instruments, Inside Information includes information conveyed by a Client and related to the Client's pending orders which-(a) is of a Precise nature;(b) is not generally available;(c) relates, directly or indirectly, to one or more Issuers of Financial Instruments or to one or more Financial Instruments; and(d) would, if generally available, be likely to have a significant effect on the price of those Financial Instruments or the price of Related Instruments."6. For the purposes of section 95(5) of the FSMR, information is considered "Precise" if it:a. indicates circumstances that exist or may reasonably be expected to come into existence or an event that has occurred or may reasonably be expected to occur; andb. is specific enough to enable a conclusion to be drawn as to the possible effect of those circumstances or that event on the price of Financial Instruments or Related Instruments.7. Similarly, information would be likely to have a "significant effect on price" if and only if it is information of that kind which a reasonable investor would be likely to use as part of the basis of his investment decisions.8. The Reporting Entity of a Listed Fund is itself best placed to determine whether information, if made public, is likely to have a significant effect on the price of the relevant Units, as what constitutes Inside Information will vary widely according to circumstances.
Financial forecasts and expectations9. Where a Reporting Entity of a Listed Fund has made a market announcement such as a profit forecast, such forecasts become, as soon as made, factored into the market pricing of the relevant Units. If the Reporting Entity becomes aware that there is likely to be a material difference between the forecast and the true outcome, the Reporting Entity should make an announcement correcting the forecast as soon as possible to ensure that the market pricing reflects accurate information.10. In relation to financial forecasts published by a Reporting Entity of a Listed Fund, the Regulator considers that circumstances giving rise to a variation from the previous one should generally be considered Inside Information and should be disclosed by the Reporting Entity as soon as possible. Even where a Reporting Entity has not made a previous forecast, circumstances giving rise to a variation of profit or revenue from the previous corresponding reporting period should be disclosed where such circumstances would have a significant effect on the price of relevant Financial Instruments. Generally, a change of 10% or more is a material change, but in some circumstances, a smaller variation may also be disclosable if it would reasonably be considered to have a significant effect on the price of the relevant Financial Instruments.11. In making such disclosure, the Reporting Entity of a Listed Fund should provide clear details of the extent of the variation. For example, a Reporting Entity may indicate that, based on management accounts, its expected net profit will be an approximate amount (e.g. approximately $15 million) or alternatively within a stated range (e.g. between $14 million and $16 million). Alternatively, a Reporting Entity may indicate an approximate percentage movement (e.g. up or down by 35%).
Relationship between continuous disclosure and periodic disclosures12. Periodic disclosures by Reporting Entities of Listed Funds are required in a number of circumstances, and examples can include interim and annual financial reports and accounts and Prospectuses.13. In the course of preparing these disclosure documents, a Reporting Entity of a Listed Fund may become aware of Inside Information previously unknown to it, or information which was previously insufficiently Precise to warrant disclosure. In such circumstances a Reporting Entity of a Listed Fund should not defer releasing that information until the periodic disclosure or other documents is finalised. In such circumstances, a Reporting Entity should make an announcement containing the Inside Information as soon as possible.
Units of the same class admitted to trading in more than one jurisdiction14. A Reporting Entity of a Listed Fund with Units of the same class admitted to trading in more than one jurisdiction should ensure that the release of announcements containing Inside Information is co-ordinated across jurisdictions. If the requirements for disclosure are stricter in another jurisdiction than in the ADGM, the Reporting Entity must ensure that the same information is released in the ADGM as in that other jurisdiction.15. A Reporting Entity of a Listed Fund should not delay an announcement in the ADGM in order to wait for a market to open in another jurisdiction.
For the purposes of section 75(2)(b) of the FSMR, a Reporting Entity of a Listed Fund may delay market disclosure of Inside Information so as not to prejudice its legitimate interests provided that:(a) the delay is not likely to mislead the markets; and(b) if the information is to be selectively disclosed to a Person prior to market disclosure, it is made in accordance with the requirements in Rule 3.5.3.
MKT 3.5.3 MKT 3.5.3(1) For the purposes of Rule 3.5.2(b), a Reporting Entity of a Listed Fund may selectively disclose Inside Information to a Person prior to making market disclosure of such information only if:(a) it is for the purposes of the exercise by such a Person of his employment, profession or duties;(b) that Person owes to the Reporting Entity a duty of confidentiality, whether based on law, contract or otherwise; and(c) the Reporting Entity has provided to that Person, except where that Person is the Regulator, a written notice as specified in (3).(2) For the purposes of (1)(a), the Persons whose exercise of employment, profession or duties may warrant selective disclosure are as follows:(a) its advisers, underwriters, Sponsors or compliance advisers;(b) the Trustee, Eligible Custodian or Persons providing oversight function of the Listed Fund;(c) an agent employed to release the information;(d) Persons with whom it is negotiating with a view to effecting a transaction or raising finance;(e) the Regulator or another regulator where such disclosure is necessary or desirable for the regulator to perform its functions;(f) a Person to whom the Reporting Entity discloses information in accordance with a lawful requirement;(g) a major Shareholder of the Reporting Entity; or(h) any other Person to whom it is necessary to disclose the information in the ordinary course of business of the Reporting Entity.(3) For the purposes of (1)(c), the Reporting Entity must, before making disclosure to a Person, provide to that Person a written notice that:(a) the information is provided in confidence and must not be used for a purpose other than the purpose for which it is provided; and(b) the recipient must take reasonable steps to ensure that the recipient or any Person having access to the information through the recipient does not deal in the relevant Financial Instruments, or any other related investment, or disclose such information without legitimate reason, prior to market disclosure of that information by the Reporting Entity.(4) Where a Reporting Entity makes selective disclosure of Inside Information pursuant to (1), it must ensure that a full announcement is made to the market as soon as possible, and in any event, when it becomes aware or has reasonable grounds to suspect that such information has or may have come to the knowledge of any Person or Persons other than those to whom the selective disclosure was made.
Guidance1. It is likely that Inside Information will be made known to certain Employees of the Reporting Entity or the Listed Fund. A Reporting Entity should put in place procedures to ensure that those Employees do not disclose such information, whether or not inadvertently, and that Employees are adequately trained in the identification and handling of Inside Information.2. Rule 3.5.3 does not excuse a Reporting Entity from its overriding obligation to disclose Inside Information as soon as possible pursuant to Rule 3.5.1. A Reporting Entity which proposes to delay public disclosure of Inside Information should refer to Rule 3.5.4, which sets out the limited disclosure exceptions permitted.
MKT 3.5.4(1) A Reporting Entity of a Listed Fund need not, subject to (2), make disclosure of information pursuant to Rule 3.5.1, where, in the reasonable opinion of the Reporting Entity, the disclosure required by that Rule would:(a) be unduly detrimental to the legitimate interests of the Reporting Entity or the Listed Fund as is applicable; or(b) disclose commercially sensitive material.(2) Where a Reporting Entity of a Listed Fund intends not to make the disclosure pursuant to (1), it must immediately file with the Regulator a confidential report which:(a) contains all the information which it seeks not to disclose and the reasons for non-disclosure; and(b) is in the English language and, where any documents accompanying the report are not in the English language, an English translation of such documents.(3) The Regulator may:(a) specify the period during which disclosure of the information included in the confidential report need not be disclosed to the markets; and(b) extend the period referred to in (a) upon application by the Reporting Entity.(4) Where a confidential report is filed with the Regulator under (2), the Reporting Entity need not comply with the requirements in Rule 3.5.1 during the period permitted by the Regulator pursuant to (3), unless or until one of the following occurs:(a) the Regulator directs the Reporting Entity to comply with Rule 3.5.1;(b) the Reporting Entity becomes aware that there is a material change of circumstances that renders the reason for non-disclosure of the information no longer valid; or(c) the Reporting Entity becomes aware or has reasonable grounds to suspect that the relevant Inside Information has or may have come to the knowledge of any Person or Persons other than by way of selective disclosure made pursuant to Rule 3.5.3(4).(5) The procedures in Part 17 of the FSMR apply to a decision of the Regulator under (3) or (4)(a).
MKT 3.5.5 MKT 3.5.5
By filing a report under Rule 3.5.4, the Reporting Entity of a Listed Fund undertakes that the contents of the report and any accompanying documents are true, accurate and not false, misleading, or deceptive and contain all the information which the Regulator would reasonably expect to be made aware of in the circumstances of the case.
Guidance1. Examples of circumstances under which a Reporting Entity of a Listed Fund might rely on the exception from disclosure in Rule 3.5.4 include where:a. it would be a breach of law to disclose such information;b. the information is a trade secret;c. there are negotiations in course where the outcome or normal pattern of those negotiations would be likely to be affected by public disclosure;d. the information is provisional and generated for internal management purposes prior to later public disclosure; ore. there are impending developments that could be jeopardised by premature disclosure.2. Rule 3.5.4 does not permit a Reporting Entity of a Listed Fund to delay public disclosure of the fact that it is in financial difficulty or of its worsening financial condition and is limited to the fact or substance of the negotiations to deal with such a situation. A Reporting Entity is also not permitted to delay disclosure of Inside Information on the basis that its position in subsequent negotiations to deal with the situation will be jeopardised by the disclosure of its financial condition.3. Where the Regulator considers that the reliance of permitted exceptions under Rule 3.5.4 is not in the interests of actual or potential investors, market integrity or the ADGM, it may direct the Reporting Entity of a Listed Fund to make either a holding announcement or full market disclosure. The Regulator may, in addition, require the Recognised Body in which the Units are traded to suspend trading of the relevant Units.
Control of Inside Information
A Reporting Entity of a Listed Fund must establish effective arrangements to deny access to Inside Information to Persons other than those who require it for the exercise of their functions within the Reporting Entity or the Listed Fund.
A Reporting Entity of a Listed Fund must establish and maintain adequate systems and controls to enable it to identify at all times any Person working for it under a contract of employment or otherwise, who has or may reasonably be likely to have access to Inside Information relating to the Reporting Entity or the Listed Fund as is applicable, whether on a regular or occasional basis.
A Reporting Entity of a Listed Fund must take the necessary measures to ensure that its Directors, Members of the Governing Body and Employees who have or may have access to Inside Information acknowledge the legal and regulatory duties entailed, and are aware of the sanctions attaching to the misuse or improper use or circulation of such information.
A Reporting Entity of a Listed Fund must nominate two individuals to be its main points of contact with the Regulator in relation to continuing disclosure and other obligations under this chapter.