The FSA has issued a warning to firms disclosing ex-dividend dates to traders prior to market announcements.
The Financial Services Authority (FSA) has warned traders and listed companies about reporting ex-dividend dates before market announcements are made. Concerns have been raised with regards to the dissemination of information concerning the dates of ex-dividends, considered to be insider information if used in relation to an investment.
“The timing of an issue being marked ex-dividend relative to a derivative’s expiry date can be a major determinant of that derivative’s value,” The FSA said in this month’s issue of Market Watch.
“Although dividend timing may not be inside information relating to the underlying equity…It may in some cases be inside information in relation to single stock and equity index features and options.”
The FSA has identified a number of occasions where derivative traders solicited deals shortly before announcements were made for upcoming ex-dividend dates, according to the report. Initial inquiries suggest that some listed companies agreed to trader requests to be informed on the ex-dividend dates prior to their announcement – an act the FSA says could be considered insider trading, depending on circumstance.
These findings into the sharing of information on ex-dividend dates works as a reminder to firms, traders and analysts to take care when requesting information and to ensure their actions are in accordance with their obligations.