The market soundings regime introduced in the Market Abuse Regulation provides a mechanism by which directors can disclose information to selected investors in order to engage their opinion on various market transactions, including IPOs, rights issues, and secondary market sales of equity or debt, even where that information constitutes inside information. This regime provides benefits for companies wishing to gauge investor interest in a potential capital markets transaction, enabling board-shareholder engagement to take place that would not otherwise be possible. The regime contains challenges however, both for companies and their advisors in terms of its operation, for investors receiving information if they do not understand the implications of being wall-crossed, and more broadly for the potential inroads it makes into the market abuse regime. This chapter will examine the operation of this regime and whether it provides a model for other forms of board-shareholder engagement

This chapter examines the impact of insider regulation on the board-shareholder dialogue. It offers a comparative analysis, revealing that EU and UK laws are more restrictive than those in the US. Drawing from this analysis, the paper raises the question of whether the EU should introduce a safe harbour rule to facilitate shareholder engagement through private disclosure of inside information. While shareholder engagement is considered beneficial for corporate governance and long-term firm value, the paper questions the necessity of selectively disclosing inside information to investors. It argues that mandating greater transparency in the board-shareholder dialogue is preferable, ensuring all shareholders have equal access to information. The feasibility and practicality of a safe harbour rule are doubted due to associated costs and challenges. In conclusion, the chapter rejects proposals to enact such rules, citing limited benefits and substantial costs.