The Finnish Bar Association’s response to ESMA’s MAR consultation paper 12/12/2024 “Draft technical advice concerning MAR and MiFID II SME GM”
13.2.2025 | LausunnotEuropean Securities and Markets Authority
Dnro L2025-14
The Finnish Bar Association’s response to ESMA’s MAR consultation paper 12/12/2024 “Draft technical advice concerning MAR and MiFID II SME GM”
The Finnish Bar Association (later on referred as the “FBA”) has considered the practical implications of the proposed delegated act supplementing Regulation (EU) No 596/2014 of the European Parliament and of the Council establishing a non-exhaustive list of final events or final circumstances to be disclosed in a protracted process and of the relevant moment for disclosure, and of situations in which the inside information whose disclosure is intended to be delayed is in contrast with the latest public announcement or other type of communication bv the issuer or emission allowance market participant (“Proposed Delegated Act”) on the Finnish market and hereby respectfully provides its comments to questions Q1-Q9 and Q11-Q14 of the consultation paper 12/12/2024.
Q1 Do you agree with the definition of protracted processes provided?
The definition “a series of several actions or steps spread in time which need to be performed, in order to achieve a pre-defined objective or result” probably covers most of the situations that need to fit under the definition. However, the FBA sees that there may be cases where it is not that clear whether a matter falls (or should fall) under the definition, such as e.g. an internal strategy revision or a profit warning situation.
Q2 Do you agree with the identified categories of processes and general principles?
The consultation paper refers e.g. to capital raises as being entirely internal to the issuer. In practice, however, in some situations existing shareholders or investors need to be contacted and undertakings obtained from them prior to the launch of the transaction to assess the feasibility of the contemplated transaction and its terms and conditions (such as the price and number of shares to be issued), even before the decision on a capital markets transaction is made. Such contacts are usually made to a limited number of existing shareholders or investors (where relevant, following the market sounding procedures stipulated in MAR) whose favourable stance can reasonably be considered necessary to launch the transaction, and not to a high number of recipients which would make the information de facto public.
For example, the board may wish to gauge in advance whether a capital raise transaction (such as an issuance of shares) requiring approval from a general meeting of shareholders has sufficient shareholder support, in the absence of which it would not be in the interests of the company to propose such transaction to the general meeting in the first place.
Consequently, the categorisation is not always this simple. The FBA’s opinion is that the correct moment of disclosure is when the board has made a resolution regarding launching a capital raise. For example, in a directed share issue executed by means of book-building, the moment of disclosure is when the board decides to initiate the book-building process, while the actual decision to issue the shares and on the number and price of the shares based on investor feedback received during the book-building process does not occur until later.
Public procurements could be addressed as a separate category, which would clarify procedures regarding them. In public procurement processes, sometimes the confidentiality of an insider project cannot necessarily be ensured because of the large number of parties involved in the preparation. In addition, at least other bidders who have taken part in the procurement process may, at the latest in the final stages of a multi-stage process, have an idea of who have participated in the procurement, which endangers the confidentiality. On the other hand, premature disclosure may risk the bidder’s success in the procurement process, prejudicing its legitimate interests. Additionally, it might not always be possible to coordinate the timing of disclosure with the authority involved. Further, it is to be noted that the procurement process often also involves an appeal period, which means that actually receiving the contract is still uncertain even after the public procurement award decision, which is usually disclosed. Public procurements can often be tricky in terms of their insider nature, the moment of disclosure and sometimes also the content to be disclosed. Public procurement could fall under examples 6 and 25 of the list in Annex I of the Proposed Delegated Act, where it should be made clear that section 25 functions as the primary guideline.
Q3 Do you agree that for protracted processes that are entirely internal to the issuer the moment of disclosure should be the moment when the corporate body having the decision power has taken the decision to commit to the outcome of the process?
The FBA considers the expression vague, and sees that it is more crucial what has been determined to be the moment of disclosure of different types of projects in the table. We comment on this in greater detail in connection with question Q11.
Q4 Do you agree that in presence of a governance structure that foresees the approval of another body further to the management body’s decision, the disclosure obligation should take place as soon as possible after the decision of the first body?
Issuers will probably have to assess this allocation of authority more carefully in the future, i.e. what exactly the phrase “decision to commit to the outcome of the process” means. However, with reference to paragraphs 59 and 61 of the consultation paper, it should be made clear that in the case a governing body has made a decision on e.g. a bond issuance but delegated the final decision to launch the process e.g. to a management team member, the disclosure obligation should take place after the delegated final decision has been made. This same approach should be applied in all kinds of situations, where the final decision-making has been delegated.
In the case of for example an internal strategy review, the disclosure obligation should not yet be triggered by the decision to initiate an internal strategy review (even if this would be considered inside information), but only at the end of the strategy review process when a resolution by the Board is taken on the new strategy.
Q5 Do you agree that for protracted processes involving the issuer and another party different from a public authority, the moment of disclosure should be when the competent bodies/persons of all parties involved, having the decision power under national law or bylaws, have taken the decision to sign off to the agreement?
As noted in paragraph 65 of the consultation paper, in cases involving another private party where the issuer enters into an agreement, the sole decision of the issuer is not sufficient to achieve a degree of certainty regarding conclusion of the agreement, as this is also subject to the counterparty’s decision.
In the FBA’s opinion the simplest solution would be to clearly tie the moment of disclosure to the signing of the agreement. Listed companies might not always have realistic chances of assessing when the other party to the transaction (especially when it is not a listed company) has made a binding decision (“explicit approval of the transaction”) other than through a final agreement signed by the other party.
This could be articulated more clearly directly in the examples included in Annex I of the Proposed Delegated Act (particularly examples 1 – 7). Such clarification could be based on the approach adopted in example 6 of the list in Annex I (“as soon as possible after entering into the relevant binding agreement”), as well as paragraph 70 of the consultation paper, which notes that in cases when decisions are to be taken by a person delegated by the governing body within the issuer, the moment when both parties take the decision to commit to the agreement may occur only when both parties become legally bound by the agreements. In practice, the legally binding effect in a majority of transactions arises upon all parties to a transaction having signed the relevant agreement. Premature disclosure without a legally binding agreement may constitute premature disclosure that may mislead investors (contrary to the purpose of the regulation articulated in recital (67) of the Amending Regulation 2024/2809), particularly if there could be material changes to the terms of the transaction signed off in principle by the board, which would be subject to the finalization and signing by e.g. the CEO.
A protracted process between two companies may also be a threat of the commencement of arbitration proceedings. The instructions could address when such process should be disclosed (typically when the issuer has become aware of the counterparty having made a request for the commencement of the arbitration proceedings).
Example 34 of the list in Annex I of the Proposed Delegated Act indicates that judicial proceedings have to be disclosed “as soon as possible after the issuer received the notification of the decision”, which sounds late if the matter heard by a court crosses the threshold of materiality. For example, under current practice, already a dawn raid inspection may have triggered the disclosure obligation. However, the moment of disclosure should also give regard to the fact that premature disclosure should not prejudice the presumption of innocence applicable to criminal proceedings and other fundamental rights of companies and/or members of their management. The Annex I of the Proposed Delegated Act could also specify the moment in time when a company shall announce that a member of its Board or CEO is subject to criminal proceedings.
Paragraph 66 of the consultation paper leaves it open to interpretation when “main elements” vs. all elements have been agreed on. Example 15 of the list in Annex I of the Proposed Delegated Act could also be clearer on when the appointment of a CEO must be announced if the signing of the CEO’s service agreement and the board’s decision to appoint them do not occur at the same time. Usually the signing of the CEO’s service agreement would be the natural point of disclosure, demonstrating that both parties have taken the decision to accept the appointment and its terms and conditions. The same applies to a CEO’s retirement or dismissal if it involves some kind of an agreement (which may include e.g. terms and conditions specifying that the retiring/dismissed CEO continues in the position for a transitional period until a new CEO has been appointed, and/or severance compensation and treatment of incentives and bonuses). Instructions on the resignation of a CEO should also be included in the list of examples in Annex I (either by way of clarifying example 15 or through a separate example), as this occasionally seems to create confusion on the market. For example, there can also be situations where dismissal of a CEO is dependent on appointment of a successor.
In this regard, we also note that footnote 20 of the consultation paper refers to employment contracts, and states that where the contract is terminated through a termination notice, the termination notice qualifies as a single off event to be disclosed immediately. While e.g. a CEO may generally be dismissed through a decision by the board, we note that CEOs may have service agreements not subject to employment law. Further, the company may also have legitimate interests to secure an amicable dismissal and avoid potential disputes and litigation for alleged breaches of the CEO’s service agreement. Such interests may be prejudiced if the public disclosure of the dismissal is not preceded by a mutual agreement on the terms of the dismissal. In such cases the natural point of disclosure would be the signing of the relevant agreement.
Q6 Do you agree that for protracted processes that are driven by a public authority with the involvement of the issuer, the moment of disclosure should be when the issuer has received the final decision from the public authority, even where the issuer and the public authority previously exchanged preliminary information that may on its own amount to inside information?
The FBA agrees with the proposed as this is aligned with the purpose of recital (67). The mere exchange of preliminary information between the issuer and the public authority disclosed at a very early stage may mislead investors, rather than contribute to efficient price formation and address information asymmetry.
Disclosing such exchanges to the public before a final decision may also jeopardize a successful outcome (such as a conclusion by the public authority that no breach of relevant regulations has occurred despite initial suspicions, and no further investigations are warranted) that might otherwise be achievable through discussions with the relevant public authority prior to a final decision.
Q7 Do you agree that for protracted processes that are triggered by the issuer and whose final outcome is decided by a public authority, two separate processes should be identified, and the moment of disclosure should occur upon completion of each of them as above outlined?
Many issuers find it important to disclose information to the public also when an application for a permit has been submitted or is being prepared. For example, for medical devices, already the submission of an application is a strong message that is of clear importance to investors. This is why it is good to be able to disclose the matter already upon the submission of an application. However, where an application concerns an insider project which is to be announced separately later on and the authority agrees to keep its statement or resolution confidential until announcement, this should still be possible.
Administrative procedures may also take a very long time, which is why it is desirable that the market can be cleansed in such procedures by also disclosing intermediate steps in the procedure. The categorisation proposed in the consultation seems logical (processes driven by a public authority and by the issuer).
The FBA wishes to note that companies may also conduct discussions with public authorities on e.g. the correct interpretation of regulations in a specific situation, which may not result in any formal application by the company or a formal decision by the public authority. Due to the inherently confidential nature of these discussions and the fact that the relevant information to be disclosed would be the transaction or measure the company would decide to launch after having discussed the matter with the public authority (and not the details of the prior discussions with public authorities as such), the existence, progress and outcome (such as a statement by the public authority made privately and only directly to the company confirming an interpretation of applicable regulations) of such discussions should generally not be subject to a separate disclosure obligation. As such, the disclosure obligation should only be limited to situations where the protracted process results in a formal application by the company and a formal decision by the public authority and not concern aforementioned situations.
Q8 Do you agree that a hostile takeover can be considered a one-off event? Do you agree with the moment for disclosure identified for takeover processes?
The FBA states that the moment of disclosure of inside information in example 3 of the list in Annex I of the Proposed Delegated Act (Takeover bid received by the issuer) is not in line with Finnish practice. Under current practice, the bidder must separate a public intent to issue a takeover bid and its actual publication (including the terms and conditions of the bid), which can both independently constitute inside information. Additionally, in Finland, once the target has publicly received a non-binding or binding takeover bid or if a hostile takeover bid has already been published, even the target company’s first reaction has been typically considered to constitute inside information and been disclosed as inside information even if the takeover bid (or intention) itself no longer constitutes inside information after being disclosed to the public by the bidder, as such reaction can influence shareholders’ perception of the bid and enable investors to assess the likelihood of the bid being successful. The target has in such a case not yet necessarily been able to indicate to the markets whether it will recommend the bid or not but, instead, this information has been made public later and, under law, a formal statutory statement by the board of directors concerning the takeover bid need not be published earlier than five business days before the earliest possible end of the offer period.
Perhaps it would also be necessary to make it clear that the making of a non-binding indicative bid privately to the target does not yet trigger either party’s disclosure obligation (or alternatively, that the disclosure of such a non-binding indicative offer that is considered serious can be delayed, as has been customary practice in Finland).
Q9 Do you agree with the proposed approach in relation to financial reports, profit warnings, earning surprises and forecasts? In particular, do you agree that profit warnings and earning surprises are to be considered as one-off events and as such should not be included in the list of protracted processes?
In Finland, the preparation of financial reports has typically not been treated as an insider project and the markets have been informed of the date of the reports’ publication in advance. Because sometimes the companies wish to publish the report in the morning before trading starts, it would be desirable that it is made possible for the board to adopt the report in a meeting the previous evening but publish the report on the earlier announced date before trading starts, or specifically state that this is not possible. The same applies to the dividend distribution proposal published in connection with the financial statements as well as the future outlook of the following financial year. In many cases companies may also need some time to finalise financial reports for publication after having received approval by the board. In cases where the board convenes to adopt the financial reports in the evening (e.g. after trading hours), the equal opportunity of investors to trade based on such information should not in most cases be prejudiced even if disclosure occurs the following morning (on the date previously disclosed by the company as the intended publication date). It can even be argued that disclosure the following morning in practice facilitates equal access to information, as many investors may not follow or be able to trade based on listed company disclosures in the evening after trading hours.
The MAR’s earlier wording and explanatory ESMA guidelines (delay of disclosure is not possible if it regards the fact that the issuer’s financial objectives are not likely to be met or that the information is in contrast with the market’s expectations) have previously been interpreted to mean that a profit warning can never be delayed.
Profit warnings usually involve calculating and verifying the figures and the presumptions behind them until they are considered sufficiently reliable. The issuance of a profit warning would typically be approved by the board of directors, or, in some cases, by the CEO. As regards profit warnings, it could be useful to have some kind of guidance on what is the decisive moment when a profit warning (positive or negative) must be issued. The issuance of a profit warning should take place in a manner that enables sufficient time necessary to verify and evaluate the facts based on diligent, realistic and justified evaluations of the status and development of the company’s business operations, financial position, forecasts and projections. The company should also have enough time to evaluate the situation, in order to enable sufficiently comprehensive disclosure, and to ensure the profit warning (if published) is correct, relevant, clear, and not misleading. Therefore, it can be questioned whether such evaluation phase would sometimes require an insider project to be established.
Under the current rules, one factor that should be taken into account when considering the need for a profit warning is the consensus among analysts (see ESMA’s Q&A regarding the MAR). ESMA’s consultation does not mention this consensus among analysts at all. If the intention is to keep the consensus among analysts as one of the criteria for assessing whether information is not in line with what was expected or previously communicated, it would be good to mention this clearly in the text of the Proposed Delegated Act and in particular in Annex II of the Proposed Delegated Act. Now those only refer to information disclosed by the issuer. The Finnish Financial Supervisory Authority has also stated that the need to issue a profit warning must also be assessed in the event that the issuer has not issued a profit forecast.
Information on a profit warning or earning surprise might often relate specifically to the preparation of a financial report, which involves many different stages. As regards paragraph 88 of the consultation paper, the FBA notes that a profit warning by definition is something that is not in line with what was justifiably expected or communicated on the market. Otherwise it is question of a minor specification of future outlook (such as a slight narrowing of the range of a numerical profit forecast), which does not need to be disclosed as inside information. If the purpose is to say that the preparation of a financial report in and of itself does not need to be treated as an insider project, and that an individual analysis should be conducted of a) whether a financial report being prepared would include other inside information than information requiring a profit warning; and b) whether information arising in connection with preparing a financial report would require a profit warning (i.e. they can be “separate sets of inside information”), this could be made more clear.
The legal certainty to issuers that the Proposed Delegated Act aims to achieve would be better ensured if instructions on the timeliness of a profit warning were clearer.
Q11 Do you consider the list of protracted processes sufficiently comprehensive? Do you agree with the proposed moment of disclosure? Would you add or remove any process?
The FBA points out that the definition of protracted processes does not clarify whether e.g. a strategy reform as an issuer’s internal process falls within the scope of the definition, and it is not separately mentioned in the list of examples. In other words, if an issuer launches a strategy process treated as an insider project, it is not clear to us whether it can under the definition be considered as a protracted process in relation to which the disclosure obligation does not arise until the board adopts the new strategy, or must a decision be made to delay disclosure at the beginning of the project. With respect to this, it should also be noted that a “material change in a business strategy previously publicly announced by the issuer” is mentioned in Annex II of the Proposed Delegated Act as one example of information that is in contrast and subject to the prohibition of delaying disclosure. In our view, companies should be able to treat a strategy process as an insider project without the need to immediately disclose it; in other words, it would be appropriate that the disclosure obligation arises first when the board has approved the new strategy.
Similarly, listed companies can also initiate “strategic reviews” concerning e.g. the potential sale or spin-off IPO of a particular division or business line. In these cases, preliminary evaluations and assessments of the division/business line and potential alternatives may not constitute inside information, but the disclosure obligation can arise upon a decision to initiate a formal strategic review. The disclosure of such initiation of a strategic review also alerts potential buyers or other investors that the company is open to receive offers for the division/business line.
This is usually followed by concrete preparations of a potential spin-off (such as preparation of a demerger plan and listing prospectus) and/or contacts and discussions with potential buyers with a view to reaching a transaction agreement (where new inside information can arise e.g. upon entering into concrete negotiations on terms and conditions with specific buyers).The final outcome of the strategic review (e.g. a decision on a sale, spin-off IPO or retaining the division/business line within the company) then often constitutes inside information that is disclosed to the public.
It seems such processes may fit within the examples for protracted processes in examples 1 and 4 – 6 of Annex I of the Proposed Delegated Act but also be caught by example 6 of the list in Annex II prohibiting the delay of disclosure. It should be considered whether the relationship between these examples also in the context of strategic review processes could be clarified, i.e. whether a strategic review process can be considered a protracted process or a one-off event subject to the MAR Article 17(4) delayed disclosure requirements (and whether delayed disclosure is possible in light of example 6 of the list in Annex II of the Proposed Delegated Act). If they are considered protracted processes, it could be clarified what is the correct moment for disclosure, i.e. are the initiation of the strategic review and its subsequent outcome considered as separate protracted processes, or is the whole strategic process a protracted process where only the outcome should be disclosed. As the disclosure of the initiation of a strategic review also has the function of indicating the company is open to receive offers from potential buyers, such clarification should of course not prevent companies from disclosing the initiation.
With regard to mergers, while in practice a merger agreement is usually signed in listed company mergers, this is, under Finnish law, legally not absolutely necessary and instead signing a statutory merger plan could also be sufficient. In the case of mergers and friendly takeover bids, a practical perspective should be considered so as to enable a process in which boards decide on approval of the merger plan and/or other transaction agreement the previous evening but authorise the CEO or e.g. the chair of the board to finalise and sign the merger plan and/or other transaction agreement on the following morning before trading starts. The moment of disclosure of inside information should not be triggered until signature to avoid the administrative burden of having to delay the disclosure of inside information overnight.
For example, in a directed share issue executed by means of book-building, the moment of disclosure is when the board decides to initiate the book-building process, while the actual issue decision does not occur until later. We think that this is not evident from the moment of disclosure as described in example 8 of the list in Annex I of the Proposed Delegated Act , “has taken the decision on a capital increase and on its core conditions”. Instead, the description corresponds more to the share issue decision taking place upon an ABB’s (accelerated book-building) closing.
Hopefully, the preparation of a financial report in and of itself does not need to be treated as an insider project in the future, either.
Q12 Do you agree that the inside information to be delayed may in some cases be assessed against more than one announcement, whenever a clear conclusion about the issuer’s position on the subject matter cannot be drawn exclusively on the basis of the very latest communication?
The amended MAR specifically refers to the “the latest public announcement or other type of communication”. We think that it would be in the benefit of the issuers and the ratio of MAR if the extent of the time period covered by such assessment was defined to be clear and as short as possible in order to avoid confusion on how old disclosures should be taken into account in the assessment. An open provision such as this would negatively and significantly reduce issuers’ legal certainty.
It would likewise be important that the extensive expression “other types of communications by the Issuer” was preferably limited to fairly official communications, as it now covers any and all communications, including non-public communication. One possibility could be to extend the definition “organized or authorized by the issuer” to the other examples.
In this regard, the concept of “persons perceived as representing the issuer” could also be clarified to exclude unauthorized statements by any person holding themselves out as representing the issuer. One solution could be to clarify that the concept refers to persons who based on objective and publicly available information are authorized to issue public statements in the name and on behalf of the issuer. This could be based on a person’s position in a statutory corporate body (such as board members and the CEO) or a separate authorization/competence based on publicly available information (such as a company’s publicly available disclosure policy which can designate e.g. the CFO, the Head of Investor Relations, and/or other members of senior management as persons authorized to represent the company and make public statements in the name and on behalf of the company).
It should also be highlighted that the announcement or communication must have been given on the same matter to which the inside information refers (“the latest public announcement or other type of communication by the issuer on the same matter to which the inside information refers”). Recital 9 of the Proposed Delegated Act does appropriately emphasise that previous communications should only be examined exceptionally in a situation in which a clear conclusion cannot be drawn exclusively on the basis of the latest communication or announcement.
As referred to under Q9, it would be useful to state out whether the consensus among analysts is one factor to be considered when assessing whether there is a contrast or only the communications by the issuer.
Q13 Do you agree with the list of communications presented in Article 4 of the draft delegated act? Do you consider it sufficiently comprehensive, or do you deem that any other cases should be added?
The list in Article 4 of the Proposed Delegated Act is very extensive and seems to cover all imaginable communications of a company. With the list being so extensive, it may also lead to a tendency to check all communications beforehand by the legal department, which may even lead to increased costs and slow down the disclosure of information to the market. As stated in connection with Q12, it would be preferable to limit the communications to fairly official communications. From investors’ perspective, regulated communications are the most important channel against which the assessments should be made.
In the modern world, it may also be relevant to consider what the stance is towards messages posted by company employees in their own name on social media (possibly without or against the employer’s instructions or permission). The characterisation proposed by ESMA for the list (“would have the ability of generating and influencing market expectations”) is extensive, and it is probably often open to interpretation which signal given by the issuer has affected market expectations.
As suggested in our response to Q12, the concept of “persons perceived as representing the issuer” could be clarified to at least exclude unauthorized disclosures.
Q14 Do you agree with the list of situations where there is a contrast between the inside information to be delayed and the latest announcement or communication as presented by ESMA in [Annex II] of the Proposed Delegated Act (Annex IV of this CP)? Do you consider it sufficiently comprehensive, or do you deem that any other situations should be added?
In example 1 of the list in Annex II regarding a profit warning, it might be beneficial to separate long-term financial or operational targets/objectives that do not normally constitute inside information from short-term financial earnings or profit guidance given to the markets. Short-term deviations from long-term targets/objectives (provided that the long-term target/objective remains realistic, achievable and not overly optimistic) should generally not constitute inside information as information on such deviations would generally not be sufficiently precise to enable a conclusion to be drawn as to the possible price effect of that set of circumstances, or constitute information that a reasonable investor would likely use as a basis for investment decisions in light of the totality of the related issuer’s activity and any other market variables.
In Helsinki February 13th 2025
THE FINNISH BAR ASSOCIATION
Niko Jakobsson
Secretary General
PREPARED BY
Attorney-at-law Mia Mokkila, Borenius Attorneys Ltd
Attorney-at-law Jaakko Laitinen, Roschier, Attorneys Ltd.
Attorney-at-law Anniina Järvinen, Hannes Snellman Attorneys Ltd
The position papers of the Finnish Bar Associations are prepared by groups of legal experts, which include around 120 attorneys-at-law. This position paper has been prepared by the expert group on securities and financial law.