What is “MAR”? And what changes has it introduced for listed companies?
02 August 2016
The EU Market Abuse Regulation (596/2014) (MAR) became directly applicable and effective in the UK from 3 July 2016, replacing the previous UK civil market abuse regime. While there is little change in the headline rules and terminology, the new regime has introduced more detailed regulation that listed companies and their advisers, directors, and others who discharge managerial responsibilities must now address.
The EU Market Abuse Regulation (596/2014) (MAR) became directly applicable and effective in the UK from 3 July 2016, replacing the previous UK civil market abuse regime. While there is little change in the headline rules and terminology, the new regime has introduced more detailed regulation that listed companies and their advisers, directors and others who discharge managerial responsibilities must now address.
What does this mean and have there been any real changes?
Market abuse under MAR comprises the familiar unlawful behaviours of:
- insider dealing;
- unlawful disclosure of inside information; and
- market manipulation.
In practice, many of the changes introduced by this new regime are seen in the detailed regulation of its (also familiar) prevention measures, such as:
- disclosure of inside information;
- insider lists; and
- PDMR dealings
The UK criminal insider dealing regime under the Criminal Justice Act 1993 is still in place and has not changed.
Where are the new provisions?
The new provisions are in MAR and its Levels 2 and 3 delegated acts, technical standards and guidelines.
The previous civil regime, in UK legislation and the FCA Handbook, has been largely removed.
An added complication is that not all the EU Levels 2 and 3 provisions have been finalised yet.
Here is a bit more detail on the new rules:
- Disclosure of inside information, delay of disclosure and additional obligations
Pretty much as before, the listed company (issuer) must announce any inside information which directly concerns it as soon as possible. Delay is only allowed where certain conditions are met.
If, however, the issuer decides to delay disclosure, there are now detailed record keeping requirements and, when it does make the public announcement, it must inform the Financial Conduct Authority (FCA) of the delay using the FCA’s prescribed form. The FCA may ask for an explanation of the delay.
AIM companies must continue to address AIM Rule 11 (General disclosure of price sensitive information) in addition to this MAR requirement. So to some extent AIM companies have two layers of regulation in relation to this – the AIM Rules and MAR.
- Insider lists
An issuer must draw up and maintain a list of everyone who has access to inside information and who is working for the issuer under a contract of employment or otherwise performing tasks through which they have access to inside information. This can include advisers, which must draw up their own lists.
It is now mandatory for AIM companies, as well as other issuers, to maintain these lists.
The requirements for their format and information content are now much more detailed. The list must record the identity of anyone having access to inside information, the reason for including them on the list and the date and time at which that person obtained access to the inside information.
Issuers will also need to deal with the Data Protection issues regarding the information on the lists.
- PDMR dealings
Persons discharging managerial responsibilities (PDMRs) and “persons closely associated” with them must notify the issuer and the FCA of transactions in or related to the issuer’s financial instruments conducted on their own account where the total value of the transactions exceed EUR 5,000 in a year. The notification must be made promptly, using the prescribed form, and no later than three business days after the transaction.
The closed periods, during which PDMR dealings are prohibited save in certain circumstances, are 30 days before the issuer’s interim financial report and its year end report. The FCA and ESMA have recently indicated that, if the issuer publishes preliminary results prior to publishing its full year end accounts, the year end closed period ends on the publication of the preliminaries, as long as the annual accounts contain no new inside information.
The Model Code (Annex 1 of Listing Rule 9) has been withdrawn from the FCA Handbook. Issuers may like to draw up and adopt their own internal securities dealings policy, consistent with the MAR regime. To assist issuers with this, ICSA, GC100 and the QCA have jointly published guidance containing a specimen policy, code and manual.
As it is not yet clear how the UK's exit from the EU will operate in practice, it should be assumed that the MAR regime will apply in the UK until further notice.
Issuers and their PDMRs and advisers will need to review and, very likely, enhance their systems and procedures, including record keeping, in order to comply with the new detailed rules, if they haven’t already done so.
If you have any questions please contact Nicola Mallett.