EU Market Abuse Regulation: What Must Listed Companies do Now?

This post comes to us from Adrian West (Partner) and Jane Bondoux (Professional Support Lawyer) at Travers Smith.

The new EU Market Abuse Regulation (MAR) will become effective across Europe on 3 July 2016 and will be directly applicable in the UK. Listed companies will need to consider how this will affect them, and put in place arrangements for compliance.

Direct Effect

In contrast to the current regime under the Market Abuse Directive, the new rules take the form of an EU regulation and therefore have direct effect in member states. 

Key Issues

The key issues for companies will be:

• Expansion of the scope of the regime to cover instruments traded on a wider range of venues (including AIM);
• More detailed requirements and procedures regarding the control of inside information, in particular for delaying disclosure and maintaining insider lists;
• Changes to the share dealing restrictions and notification requirements for directors and senior managers, cutting across the Model Code; and
• New rules on "market soundings".

MAR also makes certain changes to the safe harbours for share buy-backs and stabilisation.

Scope of the Regime

The regime will now cover financial instruments traded on regulated markets, multilateral trading facilities ("MTFs"), including AIM, and (from January 2018) organised trading facilities ("OTFs"), and other financial instruments related to them.  It also covers abuse of the financial markets through behaviour on or in relation to the spot commodity markets, market manipulation in relation to benchmarks and behaviour or transactions in relation to emission allowances.

Delaying Disclosure of Inside Information

The new rules on delaying disclosure of inside information will be a significant change for listed companies.  MAR imposes stringent record-keeping requirements including as to the date and time of the decision to delay disclosure, the identity of the persons responsible and the fulfilment of the conditions for delay.  The company will also be required to notify the FCA of the delay once the information is announced, and may be asked to provide a written explanation.

Insider Lists

The obligation to maintain "insider lists" of individuals with access to inside information will apply, under MAR, to AIM companies as well as listed companies.  MAR makes certain changes to the requirements, including as to the format of the list and the information which must be included.  More personal information, including home addresses and telephone numbers, must now be recorded on the list.

Dealings by Directors and Senior Management

Under MAR, dealings by directors and senior management must be reported and announced within three days of the transaction, subject to a EUR 5,000 threshold. 

"Closed periods", during which directors and senior management must not deal, include only 30 days prior to the announcement of an interim or year-end report which the company is obliged to make.  Currently, in the UK there is a 60 day close period before the announcement of annual results, and additional "prohibited periods" in which inside information exists in relation to the company. 

The FCA is consulting on a new annex to Listing Rule 9, in which it states its expectation that a company should consider whether it is appropriate to give clearance to deal when inside information exists, or during certain other periods.  Practitioners have questioned this approach on the basis that it lacks clarity, and it remains to be seen what approach will finally be taken in respect of clearance to deal outside the MAR closed periods in what would currently be a "prohibited period" under the Model Code.

Market Soundings

MAR also contains provisions imposing requirements on those making and receiving market soundings (i.e. communications made to gauge investor interest in a transaction).  Compliance by "Disclosing Market Participants" giving market soundings with technical standards made under MAR will provide a defence to unlawful disclosure of inside information.  Obligations on the recipients of market soundings include requirements to keep insider lists and to establish procedures to control the flow of inside information.

Our client briefing for listed companies on the new market abuse regime can be found here.