Interpretation of closed periods applicable to listed companies’ managers and executives regarding quarterly financial reporting
CNMV statement on the temporary ban of a person discharging managerial responsibilities within an issuer regarding quarterly financial reporting.
Act 5/2021, of April 12, in force since May 3, 2021, amending the consolidated text of the Spanish Corporate Enterprises Act and other financial provisions as regards the encouragement of long-term engagement of listed companies’ shareholders, removed article 120 of the Spanish Securities Market Act (“LMV”).
This amendment released issuers whose shares are admitted to trading on a regulated market from the obligation to prepare and disclose quarterly financial reports in the first and third quarters of the financial year. The main purpose of this amendment was to remove a transparency requirement that, in practice, could entail short-term pressure and an excessive burden for certain issuers. Act 5/2021 also modified article 234(2) LMV, under which the Spanish Securities and Exchange Commission (CNMV) could require issuers to submit quarterly financial reports as part of its duty to monitor periodic financial reporting.
On April 20, 2021, the CNMV issued a statement informing of the possibility that issuers continue disclosing quarterly reports voluntarily. However, as these reports do not qualify as regulated information, they should be disclosed as other relevant information or, if applicable, as inside information.
On October 13, 2021, the CNMV issued another statement, clarifying that the ban on dealing during closed periods applicable to all persons discharging managerial responsibilities within an issuer under article 19 of Regulation (EU) No 596/2014, of the European Parliament and of the Council, of 16 April 2014 (“MAR”), only applied regarding mandatory semiannual or annual financial reporting, but not regarding voluntary quarterly reporting.
Therefore, if an issuer voluntarily discloses quarterly reports, its managers and executives may trade securities and will not have to comply with any closed periods. Exceptionally, if the voluntary quarterly reports contain inside information and the managers and executives have had access to it as insiders, they will be subject to the prohibition on insider dealing. So, they will not be allowed to (i) engage or attempt to engage in insider dealing; (ii) recommend that another person engage in insider dealing or induce another person to engage in insider dealing; or (iii) unlawfully disclose inside information.
This prohibition will remain in force until the information ceases to be inside information, e.g., because it be disclosed or because it no longer be likely to materially influence the price of the securities.