Term and Significance of Ad-hoc Disclosure
Ad-hoc disclosure refers to a key concept in capital market law that obligates listed companies to immediately disclose price-sensitive inside information to the public. This disclosure obligation aims to ensure equal access to information in the capital market and to prevent insider trading as well as market manipulation. Ad-hoc disclosure is comprehensively regulated, particularly under European and German law, and constitutes a crucial pillar for ensuring transparency and integrity in the securities markets.
Legal Basis of Ad-hoc Disclosure
European Regulations
The ad-hoc disclosure obligations derive from the Market Abuse Regulation (EU) No. 596/2014 (Market Abuse Regulation – MAR) The objective of the regulation is to provide harmonized rules across Europe to prevent insider trading and market manipulation and to establish a transparent information environment for investors.
Main Contents of the MAR
The MAR defines inside information, publication requirements, and exceptions. The provisions of the regulation are directly applicable in all member states and are binding for issuers of financial market instruments.
German Implementation: Securities Trading Act (WpHG)
In Germany, ad-hoc disclosure is specifically regulated in Sections 118 et seq. of the Securities Trading Act (WpHG), which refer in substantial parts to the provisions of the MAR and include additional regulations. The Federal Financial Supervisory Authority (BaFin) monitors compliance with the requirements.
Content and Scope of the Ad-hoc Disclosure Obligation
Inside Information (§ 7 MAR)
An ad-hoc announcement must be published as soon as the company possesses inside information. According to the MAR, inside information is any information
- that is specific,
- relates directly or indirectly to one or more issuers or financial instruments, and
- which, if made public, would likely have a significant effect on the price of the financial instruments.
Examples of Inside Information
- Corporate takeovers or mergers
- Restructuring and reorganization
- Profit warnings or forecasts
- Capital measures, dividend decisions, management board-level personnel changes
Timing of Publication
Ad-hoc announcements must be without undue delay (without culpable delay) published as soon as the information constitutes inside information. This serves to protect the principle of equal treatment and market integrity.
Possibility of Postponement (§ 17 para. 4 MAR)
In exceptional cases, publication may be postponed if
- this protects the legitimate interests of the issuer,
- postponement is not likely to mislead the public, and
- confidentiality is ensured.
The postponement must be documented and immediately reported to the national supervisory authority.
Addressees and Scope of Application
The ad-hoc disclosure obligation applies to all issuers whose financial instruments are admitted to trading on a regulated market within the EU. This primarily affects public limited companies, but also companies with bonds, derivatives, or other tradable securities.
Exceptions and Special Provisions
For companies on the Open Market (Freiverkehr), which are not themselves assigned to the regulated market, there are generally no ad-hoc disclosure obligations under the MAR. However, segment-specific or stock exchange organizational requirements may apply (e.g., Basic Board, Scale of Deutsche Börse).
Ad-hoc Announcement: Form and Means of Publication
Publication must be made in a manner that enables prompt and non-distorted public awareness. In Germany, issuers are required to publish ad-hoc announcements via media that reach a European and international market (so-called Europe-wide dissemination network) and to make them available on their own website for at least five years.
Sanctions and Oversight
Sanctions for Violations
Violations of the ad-hoc disclosure obligation can result in severe sanctions, in particular:
- Fines: BaFin can impose significant fines.
- Liability for Damages: Damaged investors may assert civil claims for damages.
- Reputational Damage: Non-compliance can result in significant loss of confidence among investors and the public.
Supervision by BaFin
The competent supervisory authority, BaFin, monitors compliance with the obligations and can initiate investigations within the context of market surveillance and take regulatory measures.
Relationship to Other Disclosure Obligations
The ad-hoc disclosure obligation exists independently of other publication requirements, such as quarterly or annual reports, directors’ dealings, or voting rights notifications. Nevertheless, companies must ensure that there are no contradictory disclosures. Differentiation from other transparency rules therefore requires careful case-by-case assessment.
Case Law and Practice
The concrete interpretation of ad-hoc disclosure has been shaped by numerous rulings by the European Court of Justice, the Federal Court of Justice, and by administrative guidelines of BaFin. In particular, the question of when information is ‘specific’ and ‘price-sensitive’ is regularly assessed with reference to current market events and developments.
Significance for the Capital Market
Ad-hoc disclosure makes a significant contribution to the functionality and efficiency of stock markets. A high degree of transparency strengthens investor confidence, reduces information asymmetries, and supports price formation.
References
- Market Abuse Regulation (EU) No. 596/2014 (MAR)
- Securities Trading Act (WpHG)
- Publications and interpretations of the Federal Financial Supervisory Authority (BaFin)
See also:
- Insider Law
- Market Manipulation
- Financial Market Regulation
- Disclosure obligations in the capital market
Frequently Asked Questions
When does the obligation to publish inside information arise?
The obligation to publish inside information arises directly from Article 17 of the Market Abuse Regulation (EU) No. 596/2014 (MAR) for issuers whose financial instruments are admitted to trading on an organized market. Legally relevant is that inside information must be published without undue delay (‘as soon as possible’) as soon as it arises, i.e., as soon as the issuer becomes aware of its specific occurrence or its relation to the company. The threshold at which an ad-hoc announcement becomes necessary is determined by the potential of the information to significantly affect the stock market or market price of the relevant financial instruments. The issuer does not have any discretion regarding the economic benefit of the information but is bound exclusively to a price-relevance-oriented assessment. Publication may only be temporarily withheld in exceptional cases in accordance with Art. 17(4) MAR, for example, if the legitimate interest of the issuer prevails and there is no risk of misleading the public. The decision and documentation of a postponement require careful legal scrutiny and must always be traceable by BaFin or the responsible authority.
What sanctions apply in the event of violations of the ad-hoc disclosure obligation?
Violations of the ad-hoc disclosure obligation can have serious legal consequences. The Market Abuse Regulation (MAR) provides for significant administrative measures and fines, which may be imposed by the Federal Financial Supervisory Authority (BaFin). For corporate entities, these fines can amount to up to 10 million euros or 5% of the total annual turnover of the preceding financial year, whichever is higher. Individuals can also be fined, with amounts reaching up to 2 million euros. In addition to monetary penalties, further consequences include loss of reputation, injunctive relief, publication of sanctions (‘naming and shaming’), as well as possible civil liability claims, e.g., by investors for damages due to omitted, incorrect, or delayed publication. In addition, violations of disclosure obligations can constitute market manipulation and may be subject to criminal liability (§ 119 WpHG).
To what extent is responsibility delegable?
The legal responsibility for complying with the ad-hoc disclosure obligation lies fundamentally with the company, i.e., the issuer as a legal entity. The responsibility for proper organization and monitoring of compliance with these obligations lies with the management board or executive directors. While the technical preparation and dispatch of the ad-hoc announcement may be delegated to employees or external service providers, legal accountability and supervision obligations essentially remain with the management board or executive management. In particular, the governing body may also be held liable for delegated activities in the event of negligence or omission. According to § 130 OWiG, a violation of organizational and supervisory obligations may constitute an administrative offense if violations are not prevented due to insufficient oversight.
What special requirements exist regarding the form and content of the ad-hoc announcement?
The legal requirements regarding the form and content of an ad-hoc announcement are specified in Art. 17 MAR and additionally in Implementing Regulation (EU) 2016/1055. The announcement must clearly, precisely, and truthfully state all essential aspects of the inside information. It must not be misleading, incomplete, or embellished and must be made in such a way that the public can form an accurate picture of the actual circumstances. Indispensable minimum content includes a concise headline, information about the company, a specific fact (what is new, what has happened), the effect on the company or the market, and the location and time of publication. In case of doubt, courts and supervisory authorities have imposed high requirements for completeness. Information that could potentially lead to false conclusions can trigger sanctions.
How should temporary postponement of publication be handled?
The legal regime for publication permits the postponement of an ad-hoc announcement of inside information provided certain conditions are met. According to Art. 17(4) MAR, publication may only be delayed if the legitimate interest of the issuer in the delay prevails, the delay does not result in misleading the public, and the issuer can ensure the confidentiality of the information for as long as necessary. The decision to postpone must be thoroughly documented; the burden of proof is on the issuer. Upon publication, the supervisory authority (in Germany, BaFin) must also be informed immediately of the postponement, including a detailed description of the reasons. A breach of the duty of care surrounding the postponement can lead to significant sanctions.
Are there exceptions to the ad-hoc disclosure obligation?
As a rule, the elements of the Market Abuse Regulation are interpreted narrowly, so that the ad-hoc disclosure obligation only does not apply in narrowly defined exceptional cases. The most important exception is the possibility of temporarily postponing publication (Art. 17(4) MAR). Exceptions also exist, for example, in the context of ‘ongoing processes’ or in ongoing negotiations where the occurrence of an event is still unclear and no sufficiently specific information exists yet. However, these exceptions are interpreted strictly as a matter of law, and issuers are subject to increased documentation and monitoring obligations. The assessment as to whether an exception actually applies is regularly legally demanding and should always be examined on a case-by-case basis with legal counsel.
How does ad-hoc disclosure relate to other publication obligations, such as those under the WpHG?
The ad-hoc disclosure obligation is to be regarded as a specific, additional statutory disclosure obligation alongside the general publication obligations of the Securities Trading Act (WpHG), the Commercial Code (HGB), or other special statutes. The ad-hoc reporting obligation does not supersede or replace other disclosure regimes and can exist in parallel and cumulatively. This means, for example, that an obligation to publish an ad-hoc announcement under MAR may still exist even if information has already been published or must be published in fulfillment of other (regularly time-bound) transparency obligations. Conversely, compliance with other reporting obligations (e.g., ad-hoc disclosure as part of a quarterly report) does not exempt from the obligation to make immediate ad-hoc disclosure as soon as the statutory requirements are met. The decisive factor is the purpose of ad-hoc disclosure: the immediate and comprehensive provision of information to the capital market about price-sensitive circumstances.
