On 11 March 2020, the European Securities and Markets Authority ("ESMA") issued a statement recommending that financial market participants take certain actions in order to tackle the impact of COVID-19 outbreak on financial markets in the European Union. The recommendations cover four main topics:

• business continuity planning;
• market disclosure;
• financial reporting; and
• fund management.

Business Continuity Planning

All financial market participants are expected to implement their contingency plans including deployment of business continuity measures, to ensure operational continuity in line with regulatory obligations.

Market Disclosure

Issuers should disclose in a timely manner any relevant significant information concerning the impacts of COVID-19 on the performance of their financial instruments and their financial situation in accordance with the disclosure obligations under the Market Abuse Regulation (Regulation (EU) No. 596/2014 - MAR).

The statement strengthens the already existing duty of transparency provided by Article 17 of the MAR to disclose to the public the inside information available to the issuers, in a complete and timely manner.

Financial Reporting

ESMA recommends issuers to disclose the actual and potential impacts of COVID-19 in their 2019 annual financial report or, if this has not yet been finalised, in their interim financial reporting disclosures. Such information should be disclosed on the basis of a qualitative and quantitative assessment on the issuer's business activities, financial situation and economic performance.

Fund Management

ESMA recommends asset managers to continue to apply the requirements on risk management, and react accordingly.

Conclusion

As a consequence of the recommendations, issuers will have to take action in order to cope with the impact of the current COVID-19 pandemic. In particular, with regard to market disclosure and financial reporting, issuers should consider making available to investors information on any significant impact which COVID-19 could have on their business, financial situation or economic performance. Issuers and guarantors should consider whether the impact of COVID-19 is relevant in terms of risk factors' disclosure and the extent to which the COVID-19 pandemic may affect the issuer's ability to fulfil its obligations under the securities. Where prospectuses are being prepared in accordance with the Prospectus Regulation, any risk factors should be specific to the issuer and/or guarantor and not generic in nature.

It is important to note that all EU Member States are now affected by the COVID-19 outbreak despite the fact that, as things currently stand, different EU Member States are at different stages of the COVID 19 pandemic crisis and the measures adopted in order to mitigate the impact of the pandemic in the Eurozone may differ from one EU Member State to another. Therefore, when assessing the impact of COVID-19, an issuer should, on one hand, anticipate the effects of the pandemic crisis and, on the other hand, take into account, to the extent possible, the effects that the measures adopted by the relevant EU Member States will have on their business, financial situation or economic performance.

Next steps

ESMA, in coordination with the National Competent Authorities, is monitoring developments in financial markets in relation to the spread COVID-19.

For further advice and insights to help your business respond to the legal and contractual challenges coronavirus presents, please visit our COVID-19 Topic Centre.

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