EU markets watchdog warns companies over ‘pre-close calls’ with analysts

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By Huw Jones

LONDON (Reuters) – Companies should not share market-sensitive information with external analysts ahead of financial statements, the European Union’s securities watchdog said, in its first such warning, following cases of share volatility linked to such disclosures.

The European Securities and Markets Authority (ESMA) said on Wednesday companies should be aware of EU laws for preventing market abuses when holding “pre-close calls” with selected analysts.

These refer to communications, before the publication of financial statements, between a company and analysts who generate research, forecasts and recommendations on the company’s shares and bonds.

“ESMA considers that ‘pre-close calls’ carry inherent risks of inadvertent unlawful disclosure of inside information increased by the lack of publicity of these events and the absence of records of what was presented,” the regulator said in a statement.

“Consequently, issuers should only share non-inside information during these ‘pre-close calls’,” it added.

ESMA said “good practice” shown by companies include public disclosure of upcoming calls, making material discussed in calls available simultaneously on the website, recording the calls and making them available to regulators on request, and keeping records of information disclosed.

Piebe Teeboom, secretary general of the FIA EPTA, which represents principal trading firms, said the watchdog’s statement follows several “eye-turning episodes” suggesting leakage of price-sensitive information.

“It is right that ESMA reminds issuers of the rules that are already currently in place, but which unfortunately did not prevent these recent episodes from happening,” Teeboom said.

ESMA noted recent media reports suggesting a connection between episodes of high volatility in share prices and “pre-close calls”.

Reuters reported in October 2023 that shares in German carmaker Porsche rose after a broker said the message from a pre-close call was “neutral to positive”.

Shares in Volkswagen rose strongly in January, which traders linked to a pre-close call ahead of results, Reuters reported.

Volkswagen and Porsche, part of the VW group, said they both already followed best practices.

“Pre-close calls are an established format among listed entities to provide all market participants simultaneously with relevant public information ahead of the so-called quiet period,” Volkswagen and Porsche said in separate statements on Wednesday.

The EU’s market abuse rules are policed by national securities watchdogs, and sanctions can include fines for individuals and companies.