Summary and implications

The changes proposed by the Market Abuse Regulation (MAR) are, in many cases, more than cosmetic and if implemented will require issuers, sponsors and other advisers to make significant changes to the manner in which they regulate their affairs with respect to inside information and dealings in shares by PDMRs. A number of trade organisations in which we participate are raising concerns as to the extent of the proposed changes.

Key points to note include the following:

  • Inside information – issuers will be required to determine equivocally if information they hold is inside information or not. In addition, they must keep information about the dates and time when inside information first existed (rather than when the issuer first became aware of it) and when they are likely to disclose such inside information. Amendments are also proposed in relation to when the disclosure can be delayed, whether the issuer will need to provide a written explanation to the FCA of why inside information is being delayed and when knowledge that market rumours are false constitutes inside information. These changes could potentially be very burdensome for issuers.
  • Insider lists – the information required to be included in insider lists is being extended to include date of birth, national ID numbers, personal addresses and personal home and mobile numbers. This is a significant extension to current requirements and may be burdensome and raise confidentiality issues for issuers and their advisers.
  • Market soundings – it is proposed that issuers and all their advisers should each keep separate records of market soundings, and each participant must record calls. This could result in multiple sets of records, and would be an onerous obligation on those who don't currently have a system for recording calls.
  • PDMR dealings – MAR substantially changes the rules around PDMR dealings, including shortening the length of time for closed periods and amending the definition of "dealing". Confusion has arisen as to whether prelims would start a closed period, or whether a second closed period applies for the period before the annual report is published, particularly for AIM companies where prelims are not required under the AIM rules. Exemptions to dealing in a closed period have also been made more restrictive.
  • Model Code – as a result of the changes to PDMR dealings rules, the Model Code would be inconsistent with the provisions under MAR and the FCA is therefore consulting on whether the Model Code should be deleted and replaced with rules and guidance on systems and procedures. Issuers could potentially be left with no, or confusing, FCA guidance on when to grant clearance to deal outside closed periods and how to implement the new rules.

MAR will apply from 3 July 2016. The FCA is currently consulting on policy proposals and Handbook changes required to implement the Market Abuse Regulation, with responses required by 4 February 2016. ESMA has also recently announced that it is seeking feedback on market soundings and the delayed disclosure of inside information before 31 March 2016.

Information on how to respond to the consultations can be found on the FCA and ESMA's websites.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.