EU regulation (596/2014) on market abuse ("MAR") and EU directive (2014/57/EU) on criminal sanctions for market abuse ("CSMAD") will come into force in EU Member States (including Ireland) on 3 July 2016. MAR and CSMAD will repeal and replace the current EU market abuse regime and, as well as modifying the current regime, will also extend the regime, currently applicable to issuers of debt securities listed on EU regulated markets, to issuers of debt securities listed on EU multilateral trading facilities, such as the Global Exchange Market ("GEM") operated by the Irish Stock Exchange in Ireland (together "Issuers").
This briefing summarises the key obligations of the new regime and recommended next steps. We also include a glossary of key terminology.
The MAR regime continues to require:
- disclosure of inside information;
- preparation of insider lists; and
- reporting of certain transactions of persons within the Issuer discharging managerial responsibilities and persons closely associated with them (PDMRs);
- engaging or attempting to engage in, or recommending or inducing another person to engage in, insider dealing;
- market manipulation (attempted market manipulation is also now prohibited); and
- unlawfully disclosing inside information.
The new regime also imposes additional obligations relating to:
- delaying disclosure of inside information;
- form and content of insider lists; and
- restricted dealing periods for PDMRs.
Requirement to disclose inside information
MAR requires Issuers to inform the public as soon as possible of inside information. Disclosure must be made in a manner which enables a prompt and complete assessment by the public of the information, may not be combined with marketing information and must be posted and maintained on the Issuers website for at least five years 1.
An issuer may delay disclosure of inside information if: (i) immediate, disclosure is likely to prejudice the Issuer's legitimate interests, (ii) the delay is not likely to mislead the public and (iii) the Issuer can ensure the confidentiality of the information.
Where an Issuer delays disclosure of inside information, MAR now requires such Issuer to inform the relevant competent authority in writing of the delayed disclosure and, if required by the relevant Member State, to provide the relevant competent authority with a written explanation of how the conditions for delay were satisfied, in each case immediately after public disclosure.
Issuers should establish policies and procedures:
- to assess whether information is inside information and whether this should be disclosed or delayed;
- for immediate disclosure of inside information in the required manner;
- where disclosure has been delayed, to ensure the required conditions are met and monitored and that records documenting the delay are maintained; and
- for notification to the relevant competent authority once delayed disclosure takes place.
Prohibited activities under MAR
Prohibition of insider dealing
MAR prohibits engaging, or attempting to engage in, recommending or inducing another person to engage in, insider dealing.
Insider dealing arises where a person acquires or disposes of financial instruments on the basis of inside information relating to such financial instruments.
Prohibition of unlawful disclosure of inside information
MAR prohibits the unlawful disclosure of inside information.
Unlawful disclosure occurs where a person possesses inside information and discloses this to someone else, except in the normal course of employment, a profession or duties.
Prohibition of market manipulation
MAR prohibits market manipulation and attempted market manipulation.
Market manipulation includes behaviour which (i) gives, or is likely to give, false or misleading signals of the supply, demand or price of a financial instrument or (ii) secures, or is likely to secure, the price of a financial instrument at an abnormal or artificial level, unless such behaviour has been carried out for legitimate reasons and conforms with an "accepted market practice" under MAR.
Requirement to maintain insider lists
MAR requires Issuers or any person acting on their behalf or on their account to maintain lists, in the form required by MAR, of all people who have access to inside information and who work for them as employees or in another capacity that provides access to inside information, such as advisers, accountants and credit rating agencies 2. The Issuer remains fully responsible for insider lists prepared on its behalf.
Issuers, or any person acting on their behalf or on their account, must also ensure that each person on an insider list acknowledges in writing their legal and regulatory duties and the sanctions for breach of obligations, in each case under MAR.
Issuers should establish policies and procedures to ensure:
- insider lists are prepared and maintained where required;
- form and content requirements are followed; and
- persons on insider lists have acknowledged their obligations and the sanctions for non-compliance.
Restrictions on PDMR transactions
MAR requires PDMRs to promptly (within 3 business days of the relevant transaction) notify the Issuer and the relevant competent authority of transactions for their own account involving shares and debt instruments of the Issuer (and derivatives and other financial instruments linked to these). Pledging or lending of financial instruments and trading by a portfolio manager on a PDMR's behalf will also constitute transactions for these purposes.
These notifications will only be required when the aggregate value of such transactions by a PDMR amounts to (without netting) €5,000 or €20,000, depending on the EU Member State. Upon receipt of such notification, Issuers must promptly (within 3 business days of the relevant transaction) publically disclose the relevant transactions.
In a significant change from the current regime, save in limited circumstances, PDMRs are restricted under MAR from conducting transactions during the 30 calendar days before the announcement of an interim financial report or year-end report.
Issuers should establish policies and procedures to ensure:
- a list of all PDMRs is prepared and maintained;
- its PDMRs are notified in writing of these obligations; and
- required notifications and public disclosures adhere to the form and content requirements of MAR.
Civil and criminal sanctions under MAR and CSMAD
MAR sets out minimum administrative sanctions in respect of breaches of the new market abuse regime. These include "cease and desist" orders, the return of profits gained or losses avoided as a result of the breach, public censure, fines, withdrawal or suspension of an investment firm's authorisations and temporary bans of PDMRs within an investment firm, or of any other natural person, from exercising management functions or dealing for their own account. CSMAD requires EU Member States to implement "effective, proportionate and dissuasive" criminal sanctions for the most serious insider dealing and market manipulation offences.
Issuers should implement the necessary processes and procedures in advance of 3 July 2016 in order to ensure compliance with MAR. The Central Bank of Ireland and the Irish Stock Exchange are currently updating the Market Abuse Rules and the GEM listing rules respectively in order to bring these into line with the new EU market abuse regime.
For further information on any of the above matters, please speak with your usual Maples and Calder contact.
1 The current Market Abuse Rules of the Central Bank of Ireland ("CBI Rules") provide that this requirement is only applicable to Issuers which have a website. The CBI Rules are currently being updated in light of MAR - it remains to be seen whether this proviso is retained.
2 The current CBI Rules provide in relation to persons not employed by the Issuer who have access to inside information, for example its advisors ("relevant persons"), that such Issuer is only required to record its principal contacts at such relevant persons. This is provided that the Issuer has made effective arrangements for such relevant persons to maintain insider lists of all its persons with access to inside information - it remains to be seen whether this provision is retained.