The EU Market Abuse Regulation (MAR) took effect in the UK on 3rd July 2016. The implementation of MAR is not affected by the recent Brexit vote. New AIM Rules for Companies (July 2016), which have been amended to take into account the implementation of MAR, were published on 14th June 2016.
Suitable individuals in the Company (who are aware of when the company has possession of inside information) to be tasked to identify insiders
New insider lists to be created in ESMA format. Companies to decide whether to use separate lists for permanent and deal/ event – specific insiders, or just lists for deal/event – specific insiders.
Put arrangements in place to identify future insiders
Data protection issues to be considered
Memorandum to be issued to insiders on duties and responsibilities and acknowledged by them
A suggested form of memorandum is available to clients of Bird & Bird on request
|Letter to advisers with access to inside information to require them to maintain insider lists
A suggested form of letter is available to clients of Bird & Bird on request
Be familiar with new MAR disclosure rules and new record keeping requirements for where disclosure is delayed
Consider creating a disclosure committee or making clear who is responsible for making decisions to announce or delay announcement
Bird & Bird can review any existing policy on disclosure of inside information on request
Announcements to be added to website and kept there for five years
Share dealing and
Share dealing codes to be updated
Bird & Bird can review existing share dealing codes on request. Clients may prefer to adopt the new industry-led MAR compliant dealing code put forward by the Quoted Companies Alliance, ICSA and GC100
Memorandum to be issued to persons discharging managerial responsibilities (PDMRs) advising them of their duties and obligations under MAR. Record of such issue to be kept
PDMRs to share memorandum with 'persons closely associated'' and a record of such issue to be kept
A suggested form of memorandum is available to clients of Bird & Bird on request – the memorandum needs to be adapted to reflect the terms of the company’s share dealing code
Issuers to maintain list of PDMRs and 'persons closely associated''
Notify employees of process for disclosing share dealings to the company and the FCA (using ESMA and FCA templates)
AIM company to be ready to announce dealing notifications to the market using the ESMA template form
Employee share plans
Employee share plan dealings may need to be disclosed under the new rules
Employee share plans to be reviewed for any changes required by the implementation of MAR
Bird & Bird can review employee share plans on request
Specific guidance to be sought before undertaking market soundings
Bird & Bird can give further guidance as required
New MAR compliant wording to be added warning of insider dealing and market abuse prohibitions
A suggested form of wording is available to clients of Bird & Bird on request
Companies to obtain a new LEI code for dealing announcements
Nominate a point of contact to field questions in relation to the new rules
Details of the key changes affecting AIM companies
The key points to note are as follows:
Market Abuse offences
MAR introduces three market abuse offences:
Inside information is non-public information of a precise nature that, if made public, would be likely to have a significant effect on the price of the issuer's shares and other financial instruments.
There is a rebuttable presumption that a person who has inside information and 'deals' does so on the basis of the inside information.
Insider lists are lists of an issuer's employees and persons performing tasks for an issuer (such as advisers and accountants) who have access to inside information relating to the issuer.
Insider lists must be maintained in a template form created by the European Securities and Markets Authority (ESMA), updated for any changes and provided to the Financial Conduct Authority (FCA) on request. ESMA templates provide for deal/ event – specific insiders and an optional separate list of permanent insiders, who are considered to be insiders in respect of all types of inside information.
The obligation to maintain insider lists applies to AIM companies from 3rd July 2016 until at least January 2018, when AIM might seek an exemption as an SME growth market following the introduction of another EU Directive, the new Markets in Financial Instruments Directive (MiFiDII).
In addition to the obligation to maintain insider lists, MAR requires issuers to take all reasonable steps to ensure that individuals on insider lists acknowledge their legal and regulatory duties and are aware of the relevant sanctions for misuse of inside information.
Advisers can be asked to maintain an insider list of individuals within their organisation who may have inside information in relation to the AIM company.
Disclosure of price sensitive information
MAR includes additional obligations to disclose inside information to the market as soon as possible which now apply to AIM companies. These new requirements are similar to (but not exactly the same as) the requirements of AIM Rule 11. Despite the overlap, AIM Rule 11 has been retained. The AIM Rules make clear that compliance with one set of rules does not mean that obligations under the other set of rules are satisfied. The effect will be two, slightly different, sets of requirements regulated by two different regulators (the FCA for MAR and AIM Regulation for the AIM Rules).
The key changes in relation to the disclosure regime being introduced by MAR are in the situation where an issuer has decided to delay the disclosure of inside information. In these circumstances:
New obligations require inside information which has been announced to the public to be disclosed on the issuer's website for at least five years.
MAR also states that a disclosure of inside information to the public should not be combined with an issuer's marketing activities.
Dealings by 'persons discharging managerial responsibilities' and 'persons closely associated' with them
The new MAR rules on share dealing substantially replace the equivalent AIM Rules. This means, amongst other changes, that the required closed periods for dealings have been shortened. The closed periods under the AIM Rules included the period of two months before annual and half yearly results were notified and any other time when the issuer was in possession of unpublished price sensitive information. Under MAR, closed periods are limited to the period of 30 calendar days before the announcement of an interim financial report or a year-end report. The FCA recently stated that until further EU or ESMA guidance is given, for companies that make preliminary announcements of results, they will treat the closed period as applying to that announcement (and ending when that announcement is made) provided that the preliminary announcement includes all inside information to be included in the final published report.
The list of permitted dealings during a closed period has been narrowed to:
Details are provided in other EU Regulations of what is permitted in relation to each of these permitted dealings.
The revised AIM Rules separately include a new obligation on an issuer to have in place a ‘reasonable and effective’ share dealing policy applicable to ‘persons discharging managerial responsibilities’ (PDMRs) (being directors plus senior executives with regular access to inside information and power to take managerial decisions). The share dealing policy is required to address various headline points although detailed content requirements are not prescribed.
The rules on disclosure of share dealings are widened under the new MAR rules and the existing AIM Rule has been replaced. The AIM Rules required disclosure by directors. MAR will require disclosure by all PDMRs and ‘persons closely associated’ with them, including certain family members, controlled companies and family trusts. Transactions of a value of less than €5,000 per calendar year will not require disclosure although in practice, it is expected that companies will ignore this exemption as it would require dealings throughout the year to be tracked.
Disclosure must be made in accordance with a template form provided by ESMA, with notifications to be made within three business days both to the issuer and the FCA. The issuer must announce the dealing promptly to the market and no later than three business days after the transaction date. Issuers are required to draw up a list of all PDMRs and persons closely associated with them and notify them in writing of their disclosure obligations. PDMRs are separately required to notify the persons closely associated with them of their disclosure obligations and keep a copy of the notification.
Potential FCA sanctions for breach of MAR include:
The AIM Regulation team is planning to issue further guidance in due course and will include a 'frequently asked questions' section on its website.