LONDON (Reuters) – Companies should not share market-sensitive information with external analysts before closing their profit and loss account, the European Securities and Markets Authority (ESMA) said on Wednesday, its first warning on the subject after several episodes of volatility on stock prices.

Companies must be aware of the legislation aimed at preventing market abuse when they organize “pre-closing calls” of their accounts with analysts, recalls ESMA.

The European stock market watchdog refers to communications, before the publication of results, between a company and analysts who follow it and then publish research notes, issuing recommendations to investors on the stocks and bonds of the group concerned.

ESMA indicates that it has taken note of recent press information suggesting a link between episodes of high volatility on certain stock prices and “closing calls”.

“ESMA considers that these ‘pre-closure calls’ carry an inherent risk of an involuntary and illegal dissemination of privileged information, increased by the lack of communication around these events and the absence of archiving”, a declared ESMA in a press release.

“Therefore, issuers should only share non-privileged information during these calls,” the regulator added.

ESMA explains that the prior announcement of these calls, the publication of the documents presented during these calls on the company’s website, the recording of these calls, which can be transmitted to the regulator at its request, and follow-up information disclosed constitutes “good practice”.

Piebe Teeboom, secretary general of FIA EPTA, which represents the main brokers, points out that the regulator’s press release follows several episodes of volatility which suggest that sensitive information has been published.

“ESMA is right to remind issuers of the rules already in place but which unfortunately were not enough to prevent these events from happening,” he believes.

Reuters reported in October 2023 that Porsche’s price had increased after an analyst announced that the tone of one of these calls was “neutral to positive”.

In January, Volkswagen shares jumped following one of these calls, according to traders interviewed by Reuters. Both companies said they were already applying best practices.

“Pre-closing calls are a well-established format among issuers, in order to provide all market participants with relevant public information before the quiet period,” each of the groups said in two press releases published on Wednesday.

(Writing by Huw Jones; Blandine Hénault and Corentin Chappron for the , edited by Kate Entringer)

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