ad hoc Disclosure

An Ad hoc Disclosure is a short-term and immediate publication of material information by listed companies that could potentially have a significant impact on the share price. These announcements serve to ensure transparency on the financial markets and to inform all market participants simultaneously and comprehensively in order to prevent insider trading and unfair market practices.

The most important features of an Ad hoc Disclosure are:

1. Material information: The notification must contain information that is of significant importance for the valuation of the share, such as unexpected profit warnings, mergers, takeovers or personnel changes in management.
2. Immediacy: As soon as the company becomes aware of relevant information, it must be published immediately, i.e. without undue delay.
3. Public dissemination: The information must be made available to the public in a way that ensures that it reaches all market participants as simultaneously and completely as possible. This is usually done via specialized information services and the company's own website.
4. Legal basis: In many countries, the publication of ad hoc announcements is regulated by law. In the European Union, for example, these requirements are enshrined in the Market Abuse Regulation (MAR).

Ad hoc Disclosures are therefore an essential tool to protect the integrity and efficiency of the financial markets and to ensure investor confidence.

The term “ad hoc communication” comes from Latin. “Ad hoc” literally means “for this purpose” or “for this particular occasion”. In this context, “ad hoc” refers to the fact that the announcement is prepared and published specifically and exclusively for a particular circumstance that has suddenly arisen.

In finance, the term has been adopted to describe the way in which listed companies are required to immediately disclose important information that may significantly affect the share price. These announcements are not scheduled or regular, but are made spontaneously and on an as-needed basis, precisely when relevant events or developments occur that are of importance to investors and other market participants.

The use of the term emphasizes the urgency and specificity of the information, which must be communicated promptly and precisely in order to ensure transparency and fairness on the financial markets.

"ad hoc Message" and "ad hoc Report" are not exact synonyms for "ad hoc Disclosure," although they are related concepts. Here is a brief explanation of each term and how they differ:

1. Ad hoc Disclosure: This term specifically refers to the mandatory, immediate, and public disclosure of significant, price-sensitive information by publicly traded companies. The primary aim is to ensure market transparency and prevent insider trading by providing all market participants with equal access to crucial information at the same time.
2. Ad hoc Message: This term is broader and can refer to any impromptu or one-off communication that is created for a specific purpose or in response to a particular event. While an ad hoc message can be part of an ad hoc disclosure, it is not limited to the context of financial markets or regulatory requirements.
3. Ad hoc Report: An ad hoc report typically refers to a custom report generated to address a specific issue or query, often on an as-needed basis. These reports are common in business and IT contexts and are not necessarily related to the disclosure requirements in financial markets. They provide detailed information tailored to specific needs or questions, often for internal use.

Ad hoc Disclosures are of central importance to the financial world for several reasons:

1. Transparency and trust: Ad hoc disclosures contribute significantly to transparency in the financial markets. By publishing material information immediately, companies create confidence among investors and other market participants. Transparency prevents certain groups of investors from receiving preferential treatment and thus promotes a fair and transparent market.
2. Investor protection: By publishing price-sensitive information without delay, all investors receive the same information at the same time. This protects investors from unequal distribution of information and reduces the risk of insider trading, where some market participants could gain an advantage from confidential information.
3. Market integrity: Ad hoc disclosures ensure the integrity of the financial markets. They prevent market manipulation and ensure that the prices of securities reflect the actual economic situation of companies. This increases the efficiency of the markets, as prices are based on complete and accurate information.
4. Regulatory requirements: In many countries, ad hoc disclosures are required by law. For example, in the European Union through the Market Abuse Regulation (MAR). Compliance with these regulations is mandatory for listed companies in order to avoid legal consequences and possible penalties.
5. Information efficiency: Ad hoc disclosures ensure that important information is disseminated quickly and efficiently. This enables investors to make informed decisions based on up-to-date and comprehensive information.
6. Reputation and Corporate Management: Companies that publish ad hoc disclosures consistently and correctly can strengthen their reputation. Good Corporate Management (Corporate Governance) includes compliance with disclosure requirements and contributes to the positive perception of the company.

Examples of price-sensitive information that could be contained in Ad hoc Disclosures:

• Unexpected profit warnings or increases
• Mergers, acquisitions or significant partnerships
• Changes in senior management or board members
• Significant changes in business strategy
• Important legal disputes or regulatory developments

Overall, Ad hoc Disclosures are an indispensable tool for the functioning and stability of the financial markets by ensuring transparency, fairness and integrity.

Ad hoc Disclosures follow a structured process to ensure that material information is disclosed promptly and accurately. Here is an overview of the typical steps:

1. Recognition of relevant information:
   The company identifies information or an event that could potentially have a significant impact on the share price. This can be done by various internal departments such as management, the legal department or the investor relations department.
2. Evaluation of share price relevance:
   The information is checked for its relevance to the share price. This involves assessing whether the information could have a significant impact on the share price. This assessment is often carried out by the management in cooperation with the legal department and, if necessary, external advisors.
3. Preparation of the announcement:
   A formal ad hoc disclosures is prepared. This must be precise, clear and complete and contain all material information. Care is taken to ensure that no misleading or incomplete information is published.
4. Internal coordination:
   The prepared communication is coordinated internally and approved by the responsible managers and the legal department. This may also require the approval of the Management Board or other decision-makers.
5. Publication of the announcement:
   The ad hoc disclosures are published through appropriate channels to ensure that they reach all market participants at the same time. Typically, publication takes place via:
   1. Stock exchange information systems
   2. Company website
   3. Specialized information services and media
   4. Press releases
6. Documentation and archiving:
   The published press release is documented and archived. This is important for compliance with legal and regulatory requirements and allows for later review or audits.
7. Follow-up and communication:
   After publication, the market is monitored for reactions. The company is available to answer questions from analysts, investors and the media promptly and accurately.

This process ensures that ad hoc disclosures are communicated quickly and correctly to all relevant market participants in order to ensure transparency and fairness on the financial markets.

The form and content of an ad hoc disclosure are clearly regulated to ensure that the information is precise, understandable and accessible to all market participants at the same time. Here are the main requirements:

The misuse of Ad hoc disclosures by marketing communications is a serious problem, as it can jeopardize the integrity and transparency of financial markets. Here are the main aspects and consequences of this abuse, as well as measures to prevent and regulate it:

Main aspects of the misuse of Ad hoc Disclosures

• Misleading information:
  • Companies might use Ad hoc disclosures to publish positive but non-material information to artificially influence the share price. This can mislead investors and lead to uninformed decisions.
• Exaggerated announcements:
  • Exaggerating or unduly emphasizing certain information that in reality has no significant impact on the company or its share price.
• Delaying negative information:
  • Withholding or delaying the release of negative information while emphasizing positive news to portray the company in a better light.

Measures to prevent & regulate the misuse of Ad hoc Disclosures

• Strict regulations:
  • Regulatory authorities enforce strict rules that govern the publication of ad hoc disclosures. These include the Market Abuse Regulation (MAR) in the EU and Regulation FD (Fair Disclosure) in the USA.
• Monitoring and enforcement:
  • Regulatory authorities actively monitor the publication of ad hoc disclosures and take action in the event of violations. This can include investigations, sanctions and publicity measures.
• Internal controls and compliance:
  • Companies must implement internal control mechanisms and compliance programs to ensure that ad hoc disclosures are published correctly and in accordance with regulatory requirements.
• Training and awareness:
  • Training for employees and managers on the importance and requirements of ad hoc disclosures can prevent misuse. A culture of transparency and integrity should be promoted.

Consequences of misuse of Ad hoc Disclosures

• Legal and regulatory consequences:
  • Companies and responsible persons can be prosecuted and subject to substantial fines. Regulatory authorities such as BaFin in Germany or the SEC in the USA monitor compliance with ad hoc regulations.
• Loss of confidence:
  • The misuse of Ad hoc disclosures can lead to a loss of confidence among investors and market participants, damaging the share price and reputation of the company in the long term.
• Market manipulation:
  • Misuse of Ad hoc disclosures can be considered a form of market manipulation, which can lead to significant legal consequences.

Examples & case studies of misuse of Ad hoc Disclosures

• Exaggerated profit forecasts:
  • A company might publish exaggerated earnings forecasts to drive up its share price, only to issue a profit warning later when actual results do not meet expectations.
• Delayed negative news:
  • A company might withhold negative news, such as legal problems or poor financial results, and emphasize smaller positive news instead.

The misuse of ad hoc disclosures through marketing communications poses a serious threat to the integrity of the financial markets. Strict regulation, active monitoring by regulators, internal controls and training are key measures to prevent and regulate this abuse. Companies must ensure that they fulfill their ad hoc disclosure obligations correctly to ensure investor confidence and market fairness.