RE: RE: JV?3 Dec 2020 21:33
THE UK REGIME
Historically, it was unclear to what extent UK companies were obliged to update the market on their trading performance between their regular annual or half-yearly announcements. Until 1995, the London Stock Exchange's (LSE) Listing Rules contained an obligation on listed issuers to "avoid the creation of a false market". This was sometimes interpreted as an obligation merely to avoid selective disclosure of information that would enable some market participants to trade on information that was unavailable to others.
However, while the UK rules historically were not clear as to when an update of trading performance or expectations was required, the Listing Rules and the City Code on Takeovers and Mergers (Takeover Code) have for many years required a company that chose to make a profit forecast or profit estimate to report on the forecast or estimate when undertaking certain types of transaction.
In order to avoid the additional regulatory burdens and the potential public embarrassment that could result from issuing "official" profit forecasts or profit estimates, some companies "guided" the market by briefing analysts who then published allegedly independent but well informed research containing financial forecasts based on the guidance received.
The position changed significantly in the UK in the mid-1980s, with the introduction of legislation outlawing insider dealing (the Company Securities (Insider Dealing) Act 1985; now Part V of the Criminal Justice Act 1993 (CJA)) and the creation of a new criminal offence relating to a course of conduct creating a misleading impression (section 47(2), Financial Services Act 1986 (1986 Act); now replaced by section 397(3), Financial Services and Markets Act 2000 (FSMA) ). Both companies and securities professionals, such as analysts, became increasingly concerned about the disclosure and use of unpublished price sensitive information in case it should result in a criminal prosecution for insider dealing. In one high profile case, an analyst was prosecuted but the analyst's conviction was quashed on appeal ((HM Advocate v Mackie, The Times, 30th September, 1994; PLC, 1994, V(3), 72). Section 47(2) of the 1986 Act relating to a course of conduct creating a misleading impression also led to the concern that a company's failure to correct market expectations of its performance could be argued to be a course of conduct that created a misleading impression, and hence a criminal offence.
Against this background, Chapter 9 (Continuing Obligations) of the Listing Rules relating to disclosure of information by companies was amended in 1995 and the LSE issued price sensitive information guidance focusing, in particular, on analysts' briefings. This guidance was updated by the UK Listing Authority (UKLA) in 2001 (The Price Sensitive Information Guide (PSI Guide)) (section 14, Appendix 2, UKLA Guidance Manual, PLC, 2001, XII(11), 89) (see box "The Price Sensitive Information Guide").