Wall crossing

Inside a bank an information barrier separates the people working on a live matter from everybody else. Bringing somebody across that barrier is a controlled event: they are told they are about to receive inside information, they consent, they are added to an insider list, and they become restricted from dealing in the name.

The same procedure is applied outside the firm. The European market abuse regime formalises it as the market sounding regime, used where an issuer or a seller wants to gauge investor appetite before a transaction is announced. It runs on a standard script, consent recorded before anything substantive is said, a record of who was approached and what was disclosed, and a notification afterwards once the information has ceased to be inside information.

The feature that surprises people is that consent comes first. The investor is deciding whether to accept information it has not yet seen, about a company it may already own, so it is buying a restriction without knowing what the restriction is about.

That makes a sounding a cost rather than a favour. An investor that accepts cannot deal in the name until announcement, which matters most where it already holds the stock or had planned to trade it, so declining is a normal commercial answer rather than a signal of disinterest.