I. MFSA FINDINGS ON INSIDER LIST COMPLIANCE
In a recent Dear CEO Letter (the Letter), the Malta Financial Services Authority (MFSA) provided the market with a summary of its findings from a data-gathering exercise carried out with 28 Maltese issuers in respect of their obligation to keep insider lists (LOI) in terms of article 18 of the EU Market Abuse Regulation (MAR).
As a general note, the MFSA noted a positive shift in compliance with the provisions of article 18 MAR however its findings also evidence a clear need for further improvements by issuers. The key findings of the Letter, as well as our own personal observations are set out below.
Temporary vs permanent insider lists
In terms of MAR, issuers (and any person acting on their behalf or on their account) must draw up temporary LOIs to include all persons who have access to inside information and who are working for them under a contract of employment, or otherwise performing tasks through which they have access to inside information, such as advisers, accountants or credit rating agencies. Temporary LOIs are to be drawn up on a deal-, event- or project- specific basis. To that end, temporary LOIs should be divided into separate sections for each piece of specific inside information. Each section should list all persons having access to the same specific inside information.
To avoid multiple entries in respect of the same individuals in different sections of the LOI, it is possible to list these individuals in a separate section of the LOI, referred to as the permanent insiders section (or permanent LOI), which is not related to specific inside information. The permanent insiders section should only include those persons who, due to the nature of their function or position, have access to all inside information within the entity at all times. The MFSA positively noted that the majority of issuers had drawn up both permanent and temporary LOIs however it also reminded the market that the use of permanent LOIs is strongly recommended.
Persons to be included in LOIs
From its findings, the MFSA noted that persons who may not have necessarily been permanent insiders, such as external auditors, were erroneously included in permanent LOIs. In this respect, issuers should be careful not to overpopulate permanent LOIs.
It is the MFSA's expectation (which we do not necessarily agree with) that individuals who carry out work in relation to Financial Analysis Summaries (FAS) and/or Annual Financial Statements (AFS) should be included in temporary LOIs. In our view, this is somewhat of a sweeping statement, and issuers, especially debt issuers, should first analyse whether their FAS and/or AFS include inside information before including any person who works on these documents in the LOIs.
Issuers are reminded that where a service provider included in a temporary LOI is not a natural person (e.g. an audit firm), it shall be sufficient to provide the identity of a contact person (e.g. audit partner) within the service provider in the temporary LOI. The service provider would then be obliged to draw up and keep updated their own LOI containing details of employees who are privy to inside information relating to the issuer.
Templates and record keeping obligations
Use of the official MFSA permanent LOI and temporary LOI templates is strongly encouraged, and issuers are also urged to include all the information requested in the templates. When drawing up a temporary LOI, issuers are reminded that those persons involved in more than one deal, event or project will need to be included for each deal, event or project in which they are involved.
Both temporary or permanent LOIs are to be retained for a period of at least five years from their creation or last update.
As a matter of best practice, LOIs should be kept confidential and only disclosed within an issuer on a need-to-know basis.
Notification requirements
Issuers are required to promptly inform any person placed on an LOI about their inclusion in the list, the legal and regulatory duties entailed and the sanctions applicable to insider dealing and unlawful disclosure of inside information. Insiders should acknowledge receipt of this notification in writing. The MFSA noted that several issuers did not provide it with (i) copies of the insiders' acknowledgements in writing or (ii) the initial communication sent to insiders. In this respect, the MFSA recommended that communications sent to insiders are made in writing and kept on record.
While detailed communications to insiders are commended, the MFSA noted that some issuers had included obligations applicable to insiders in terms of article 18 MAR as well as those applicable to persons discharging managerial responsibilities (PDMRs) in terms of article 19 in their communications to insiders, potentially leading to confusion. The MFSA therefore recommended that issuers maintain two separate communications, one addressed to insiders, and one addressed to PDMRs.
II. ESMA CONSULTATION PAPER
On 3 April 2025, the European Securities and Markets Authority (ESMA) published a consultation paper proposing to lighten the data to be included in LOIs. This exercise is being carried out as part of a broader effort to promote EU capital markets, commonly referred to as the 'Listing Package'. In practice, ESMA is proposing the removal of the following data points from both temporary and permanent LOIs: (a) birth surname, (b) the date of birth, in so far as a national identification number is provided, (c) personal telephone numbers, and (d) personal full home address. ESMA is also proposing the removal of insiders' company name and address column from temporary LOIs. These are welcome suggestions which should reduce the burden on issuers and other persons required to draw up and maintain LOIs.
ESMA is inviting comments on the consultation paper until 3 June 2025.
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.
