Pre-Close-Calls – Supervision now taking a closer look

Pre-Close-Calls - Supervision now taking a closer look


The Federal Financial Supervisory Authority (BaFin) is currently examining private discussions between stock companies, analysts, and investors more closely to investigate potential informational advantages, according to Institutional Money magazine. These discussions, held in small groups and known as Pre-Close-Calls, are intended to prepare analysts for upcoming results but could lead to uneven distribution of information.



An example underscoring these concerns occurred in April, as reported by Institutional Money, when Continental’s stock fell without apparent cause despite the company not releasing any new information. Experts suggest this pattern indicates that certain traders were informed in advance. Such private discussions are a tradition and widely practiced in Germany.

Companies, however, emphasize that they do not disclose new information during these discussions. Nonetheless, there are concerns that certain market participants may gain access to market-relevant news before it is publicly disclosed. Consequently, some investors are calling for a change in this practice.

Regulation fair disclosure in the USA
In contrast, nearly 25 years ago in the USA, the former common practice of companies providing special briefings to broker firms was abolished. The Securities and Exchange Commission (SEC) introduced Regulation fair disclosure, prohibiting companies from selectively disclosing information to some investors while withholding it from others.

In Europe, longstanding frustration over this practice is now resurfacing in a more volatile environment. However, the European Securities and Markets Authority (ESMA), the EU’s top Securities Regulatory Authority, explains that market supervision and the analysis of specific volatility episodes fall under the jurisdiction of national authorities.

Analysts and fund managers criticize the practice of Pre-Close-Calls as unfair, arguing that those with access to initial information may gain an unfair advantage.

Some companies, like Volkswagen, are striving to be more transparent by holding these discussions after market close to allow participants adequate time for information processing. Others, such as Porsche, invite both investors and analysts to their discussions to reduce information asymmetry.

Overall, the practice of Pre-Close-Calls, granting certain analysts preferred access to information, raises important questions. BaFin and other interest groups advocate for increased transparency to strengthen market integrity and ensure all investors have equitable access to information.