What to disclose?

Deciding on whether something is price sensitive and needs to be disclosed through the regulatory channels lies at the heart of the IRO’s task. Unlike many other markets, the UK has no specific ‘materiality tests’ – there are no thresholds of the likely impact on the share price, and no case law that defines what a company should disclose.

Rather, the requirements to disclose are explained in a scattered series of documents. These tell IRO’s the structure against which they should decide whether to disclose information, but as in other other regimes, ultimately, the IRO is the final arbiter.

At the heart of the regulations are The Listing Rules, which defines in general terms what a company should disclose to the market. The Listing Rules are published and overseen by the Financial Services Authority, and include the the general obligation to disclose without delay where there have been “major new developments which may be price sensitive to its own shares” (my italics) .

To help IRO’s decide whether something is price sensitive, the FSA publishes its ‘PSI Guide’, which notes that factors influencing the price sensitivity of an item of information will vary widely across companies, and include the company’s size, developments in the recent past, activity in the sector etc. It also notes that a percentage movement in profits may be more significant for a company with a larger market cap.