Protecting your MAR position: you are only as strong as your weakest link
Five steps to protecting your MAR position
A significant number of UK listed companies are still grappling with the insider list provisions of the new Market Abuse Regulation. Some have their systems in place and are on top of the issues as far as their own internal insiders are concerned. Is this sufficient or are your third party providers your weakest link?
When a company receives a request from its Competent Authority (the FCA for Companies with securities listed on a UK exchange), it must provide its full insider list “as soon as possible”. If you operate an appropriate system to record your insiders, such a list should be available at the press of a button but it is likely that this is only a part of the solution.
As “the issuer”, you are responsible for producing a list which includes all persons who have access to inside information. This includes those persons at third parties. This is where problems can - and probably will - occur.
Although you may have appropriate agreements in place to enable you to seek compensation from your third parties if they do not keep full insider lists in the required format (you do have these agreements, don’t you?) the completeness of your lists (including third party details) is your responsibility. If there is a failure by a third party, the damage will be to your reputation; the public criticism will be of you; the newspaper articles will refer to you.
So, not only do you need to test your internal systems but you need to test those for suppliers who receive inside information. Typically this will include lawyers, accountants, tax advisors, corporate finance advisors, “NOMADS”, printers, share plan administrators and PR agencies. We fear that many of these will not have upgraded their systems to deal with MAR.
How easy is it to test this?....
A first step would be to bring together a full control list of all those third party suppliers who will / may be in receipt of inside information.
Ask each supplier to confirm that they have in place a system that will provide the appropriate information in accordance with the Market Abuse Regulation whenever requested by you. If you have reviewed your contracts with them in anticipation of MAR, you will probably already know the answer to this question.
Those responding “no” will require rectification urgently and you may need to consider whether you can use them in the intervening period.
Those responding “yes” obviously pass the first test.
The second part of your question would be to ask the suppliers who have systems in place to forward to you a dummy insider list so that you can ensure it is in the format required by the Regulation.
Now you have a list of third parties who you can prima facie trust as not weakening your MAR position.
When you have involved the third party in one or more matters that involve inside information and for which they have been made insiders, pick a date during the period when there was price sensitive inside information and ask for their insider list in respect of you as the issuer. This will allow you the ability to test that their systems will safeguard your MAR position.
Examine this list and ensure that it seems to make sense and accord with your interaction with the supplier. Does it fail to include people you have dealt with and who should be on the list? Is all the required information shown?
As the issuer, you will be judged on the correct operation of your entire insider list, including the list operated on your behalf by your suppliers. Your next step is to ask each supplier for a copy of the confirmation from each of their insiders that they understand the legal and regulatory duties entailed and are aware of the sanctions applicable to insider dealing and unlawful disclosure of inside information.
Undoubtedly there will be issues to resolve as a result of these enquiries but the sooner they are resolved, the easier you can sleep at night.