Ad Hoc Disclosure under the EU Listing Act ( Veil/Wiesner/Reichert, AG 2023, 57)

Die Ad-hoc-Publizität steht vor der nächsten Reform. Die Europäische Kommission schlägt mit dem Listing Act eine Neuregelung vor, weil die gegenwärtige Regulierung als zu kostenträchtig erscheint und (zusammen mit anderen komplexen Anforderungen des EU-Aufsichtsrechts) als Hindernis für den Kapitalmarktzugang angesehen wird. Der Vorschlag ist einfach und bestechend zugleich: Emittenten sollen in Zukunft nicht mehr verpflichtet sein, Zwischenschritte offenzulegen. Die Publizitätspflicht soll sich auf Informationen über Umstände beschränken, die bereits gegeben sind oder bei denen man vernünftigerweise erwarten kann, dass sie in Zukunft gegeben sein werden. Dieser Artikel untersucht, warum die Regelung der Ad-hoc-Publizität reformbedürftig ist, welche rechtspolitischen Optionen dem europäischen Gesetzgeber zur Verfügung stehen und warum der Vorschlag der Europäischen Kommission überzeugend ist. Ferner greift er offene Fragen auf und unterbreitet weitere Reformvorschläge für das Gesetzgebungsverfahren.

I. Introduction
II. Reasons for Reforming Ad Hoc Disclosure and Updated Policy Objective
1. Reasons for Reforming Ad Hoc Disclosure
a) Preventing Insider Trading?
b) Reducing Information Asymmetries?
c) Conclusion: Ad Hoc Disclosure Out of Balance
2. Updated Policy Objective for Ad Hoc Disclosure
III. Reforming Ad Hoc Disclosure
1. The Commission’s Considerations
2. The Commission’s Proposal as a Sensible Policy Choice
IV. The Way Forward
1. Applying the Commission’s Proposal
a) Solution Under Current Law
b) Solution According to Art. 17(1) MAR-Proposal
2. Open Questions and Suggestions
a) Use of Indications as a Regulatory Technique
b) Final Events and the Commission’s Indicative List
c) Confidentiality Obligation under Art. 17(1b)
d) Delay of Ad Hoc Disclosure
aa) Legitimate interests
bb) No Misleading the Public
cc) Ex ante Notification of the Delay
e) Failure to Ensure Confidentiality (Art. 17(7) MAR-Proposal)
f) Disclosure under Art. 17(8) MAR
g) Regulation of the Attribution of Knowledge?
V. Conclusion


I. Introduction
1
In a recently published proposal under the ‘Listing Act Initiative’ the European Commission proposes a redesign of the ad hoc disclosure system (“MAR-Proposal”). 2 The revised version of Art. 17(1) MAR starts off with the familiar demand that an issuer shall inform the public as soon as possible of inside information which directly concerns that issuer. However, in contrast to the current regulatory approach, intermediate steps in a protracted process as referred to in Art. 7(2) and (3) MAR shall not be subject to ad hoc disclosure, Art. 17(1) sentence MAR-Proposal. This provision is flanked by two additional paragraphs. Art. 17(1a) MAR-Proposal requires the Commission to set out a non-exhaustive list of relevant information to be published under Art. 17(1) MAR and, for each information, the moment when the issuer can be reasonably expected to disclose it. Thus, the Commission would for the first time provide issuers with guidance on how to apply the relatively vague standard of Art. 17(1) MAR. This marks a significant difference AG 2023, 58to current law in which only some NCAs provide guidance on how they apply Art. 17 MAR. In addition, Art. 17(1b) MAR-Proposal mandates the issuer to ensure confidentiality of inside information (Art. 7 MAR) until that information is disclosed pursuant to Art. 17(1) MAR-Proposal. Finally, the Commission proposes to amend the rules for delaying disclosure (Art. 17(4) MAR) and for failing to ensure the confidentiality of information (Art. 17(7) MAR).

2
The Commission proposal on ad hoc disclosure is largely in line with the proposal we submitted to the Commission in the course of its Targeted Consultation, discussed with the DG FISMA team and presented at the ECFR conference 2022 in Leuven, Belgium. We are therefore very much in favor of the path the Commission has taken. Nevertheless, it is worth to take a closer look at the reasons for reforming ad hoc disclosure and assess the available policy options. Finally, this article puts some ideas for the future legislative process up for discussion.

II. Reasons for Reforming Ad Hoc Disclosure and Updated Policy Objective
3
Reforming capital markets law to foster capital-market based financing as pursued by the European legislature is a sound policy goal. Financial systems perform a crucial function for the real economy by influencing the allocation of resources across space and over time, which is said to have a positive impact on economic growth. Regarding capital markets, empirical research shows that they provide unique economic benefits and are especially important for more sophisticated economies: Capital market-based financing gives companies better access to and the opportunity to diversify their funding sources, reducing their reliance on bank loans. This in turn makes companies less vulnerable to market volatility and more resilient in periods of shocks. In this way, more capital-market-based financing also helps spreading and reducing risk for the overall economy. Finally, public markets attract companies by offering the opportunity to diversify their investor base. However, for capital markets to fulfill these economic functions, not only efficient primary but also secondary market prices are needed. Such understanding is also echoed in recital 2 sentence 2 MAR. Functioning capital markets create public confidence; they require an integrated, efficient and transparent market (recital 2 sentence 1 MAR). That said, there is reason to assume that EU capital markets are still underdeveloped compared to U.S. and U.K. markets. For example, the market funding ratio in the USA (UK) is approximately 70 % (60 %) and in Europe 35 %. Furthermore, stock markets in the EU 21 were about half the size of credit markets in 2015. Economic research suggests that, among other factors, capital markets law has a positive influence on the development of capital markets. Mandatory disclosure, in particular, has a beneficial effect on the functioning of capital markets by improving efficient pricing and (indirectly) real economic efficiency.

4
While it is to be welcomed that the Commission is seeking to improve the regulation of capital markets, it is important to remember that strengthening European capital markets depends on many other factors, efficient regulation being only one of them. This leads us to the question: Is ad hoc disclosure in need of reform? Answering it implies a discussion of the normative objectives of ad hoc disclosure. Under the current regulatory approach, ad hoc disclosure serves a dual function of reducing information asymmetries and preventing insider trading. This has far-reaching consequences for the legal design and interpretation of Art. 17(1) MAR. If we understand ad hoc disclosure (primarily) as an antidote for insider trading, this generally argues in favor of a broad and comprehensive disclosure obligation. However, disclosure comes at a cost, and even efficient prices are not an end in themselves, but must be balanced with their costs, which issuers and investors bear. Cost-efficient regulation is in their joint interest and important for the attractiveness of public markets. Turning to MAR, a closer look raises serious doubts that Art. 17(1) MAR is convincing from a cost-benefit perspective. Having already elaborated on this point in our recent article on the EU Listing Act, we will focus here on the Commission’s arguments put forward in the Proposal and the Impact Assessment. Our analysis not only shows that the current regime is indeed in need of reform, but also paves the way for a revised understanding of the goals of ad hoc disclosure.

1. Reasons for Reforming Ad Hoc Disclosure
5
Dating back to the Council Directive 1979 ad hoc disclosure has undergone a remarkable development and is now a cornerstone of the disclosure regime of European capital markets law. The history of ad hoc disclosure represents an inexorable march towards a broad and comprehensive disclosure obligation. Step by step, the temporal and personal applicability, but also the scope of information that is subject to Art. 17(1) MAR, has been expanded. In particular, the Daimler/Geltl decision of the ECJ had a significant influence on the design of ad hoc disclosure in the Market Abuse Regulation and put a stop to attempts by the Commission to ‘unbundle’ ad hoc disclosure and the insider trading regulation in the MAR. To understand the current system, it is important to keep in mind that the goal of preventing insider trading has been the driving force behind the development of the law and has led to the comprehensive disclosure obligation of Art. 17(1) MAR. How convincing is this approach?

a) Preventing Insider Trading?
6
While the regulatory objective of preventing insider trading is not completely disregarded, it is striking that neither the Impact Assessment nor the Proposal address the concern that a limited scope of ad hoc disclosure could increase the risk of insider trading. Indeed, the effectiveness of ad hoc disclosure in preventing insider trading is questionable: First, in case of a delay (Art. 17(4) MAR), the risk of insider trading continues to exist. Second, while issuers are required to disclose inside information as soon as possible, it will still take time for...