Need to know: Disclosure rules

Why was the Marks & Spencer chief executive appointment announcement brought forward?

The news of Marc Bolland’s appointment at Marks & Spencer had been planned for release after the markets closed last Wednesday. A leak to Sky News, which then broke the story, meant that M&S had to issue the statement immediately.

Morrisons made a statement just over an hour later. The news shocked the City and retail watchers alike – Marks & Spencer’s shares rocketed while Morrisons’ fell.

Usually such announcements are co-ordinated by the companies but a leak can catch them off guard and result in regulatory problems unless dealt with quickly and correctly.

What are the disclosure rules?

When anything occurs that is likely, or even only possibly, to have a share price impact the company concerned is obliged to put up a Regulatory News Service announcement as soon as possible. In the case of M&S and Morrisons, for example, the swift effect the leaked news had on the two companies’ share prices illustrates exactly why the official disclosure had to be made early.

As well as the obvious – appointments, acquisitions and results – there are also rules designed to ensure an “orderly market”. So if speculation prompts a big share price, or the board is aware of a rumour’s basis in truth, it must act. It may, for instance, formally deny or confirm speculation.

In what other cases do announcements need to be brought forward?

Other than leaks, one of the main reasons to bring announcements forward is when profits are going to miss, or exceed, expectations by 10% either way.

Next, for example, brought forward its first-half trading update by a week following better than expected trading and improved clearance rates for its end of season Sale. Profit warnings also force early announcements. 

And in September Kingfisher was forced to reveal first-half profits early after results information was accidently sent to analysts by email. Such incidents are rare.

Where do the lines blur?

Sometimes it is hard to judge whether information is going to affect the share price. One financial PR gives the example of an analyst trip when sales per sq ft, which had previously been estimated by the City but not explicitly revealed, were provided.

Such information may or may not move the share price and it can be hard to judge at the time. However, if the share price were to start to move significantly then an announcement would need to be made straight away.