Explanatory note

The Regulations give effect to the provisions of article 7 of the Council Directive of 13th November 1989 co-ordinating regulations on insider dealing (89/592/EEC OJ No. L334/30). Article 7 requires that all companies and undertakings, the transferable securities of which are, whatever their nature, admitted to trading on a market which is regulated and supervised by bodies recognised by public bodies, operates regularly and is accessible directly or indirectly to the public, should be under an obligation to inform the public as soon as possible of any major new developments in the issuer’s sphere of activity which are not public knowledge and which may, by virtue of their effect on the issuer’s assets and liabilities or financial position or on the general course of its business, lead to substantial movements in the price of the securities admitted to trading. The authorities responsible for the market on which securities are admitted to trading may exempt a company or undertaking from compliance with the requirement if the disclosure of the information would prejudice the legitimate interests of that company or undertaking. In the United Kingdom, the obligation extends to companies and undertakings whose securities are admitted to trading on an investment exchange recognised under the Financial Services Act 1986.

Regulation 2 of, and the Schedule to, the Regulations contain definitions which are relevant for the purposes of the Regulations.

Regulation 3(1) imposes the obligation required by article 7 except where the securities in question are admitted to listing in accordance with Part IV of the Financial Services Act. Listing rules made under that Part impose the obligation in relation to such securities.

Regulation 3(2) enables an investment exchange recognised under the Financial Services Act to dispense an issuer from compliance with the obligation in the circumstances permitted by article 7 and regulation 3(3) requires that each recognised investment exchange must have rules which enable it, at least, to discontinue or suspend trading in the relevant securities where there has been a failure to comply with the obligation.

Regulation 4 makes the obligation imposed on recognised investment exchanges by regulation 3(3) one of the requirements which an exchange must meet if it is to continue to be recognised under the Financial Services Act.