Companies should publicly and promptly disclose information they hold about their dividend policy and payments in order to comply with EU laws on inside information, an independent EU financial services body has said.

The European Securities and Markets Authority (ESMA) said that details about dividends would be considered 'inside information' under the terms of the Market Abuse Directive (MAD).

ESMA is an independent EU authority that aims to safeguard EU financial markets and establish regulatory "convergence" across the trading bloc. It said it was issuing a reminder to companies to promptly disclose the dividend information after recent cases emerged where companies' failure to do so had impacted on some share prices. ESMA said companies "whose shares are included in reference indices and are the underlying in listed derivatives contracts" should "pay special attention" to its notice.

"ESMA is aware of the influence that information on expected dividends has on the price of futures and other derivatives. It also acknowledges the effect that changes in dividend policies and payment patterns have on the price formation of equity derivatives, including futures. ESMA would like to draw attention to this issue," the body said in a Questions and Answers paper (5-page / 61KB PDF) on the common operation of MAD.

"A number of episodes of late or incomplete disclosure of the full details of dividend payment announcements that may have caused undue effects on equity derivatives prices have recently come to ESMA’s attention. ESMA reminds issuers that they should consider any relevant information related to dividend payments and policies as inside information, should this information be likely to have a significant effect on the prices of either the issuer’s shares or related derivatives or both," ESMA said.

The information should be "disclosed as soon as possible" in a way that allows the public "fast access" to it in order to make a "complete, correct and timely assessment," ESMA said. The information that should be disclosed includes the value of dividends, whether they are being paid as ordinary or special dividends, changes to previously announced information or changes in "payment patterns," it said. The details should be made public "promptly" even if they are subject to change or approval.

ESMA said that companies' "investor relations units" should disclose only the information previously released in order "that selective or unintended disclosures regarding the issuers' dividend policy are avoided".

MAD lays out strict rules on what constitutes inside information and when it should be disclosed. Generally companies whose shares are publicly traded are required to inform the public "as soon as possible" of any information that, if made public, would affect their share price or any related derivatives. Companies are allowed to "delay" disclosing the information so as "not to prejudice" their own "legitimate interests" on condition that doing so "would not be likely to mislead the public" and providing the information is kept confidential.

MAD also contains rules prohibiting company management, staff and shareholders amongst others from using inside information they are in possession of to buy or sell "financial instruments" for either their "own account" or that of a third party.