Market Abuse Regulations Insider Lists - Technical Briefing
UK listed companies have been required to maintain a record of individuals in possession of inside information for a number of years. These rules are being extended through the introduction of the Market Abuse Regulation (“MAR”) by the European Union. Although MAR came into force in July 2014, the majority of MAR’s provisions will apply to companies listed on the main market from 3 July 2016. They will apply (with some relaxations) to “SME Markets” (such as AIM) from 3 January 2017.
On 28 September 2015, the European Securities and Markets Authority (“ESMA”) published the draft technical standards which provide further information on the required content and format of records to be maintained under MAR. This note provides a briefing on the main contents of MAR and the draft technical standards in relation to the format of insider lists and the submission templates.
The possibility of further changes
As far as ESMA are concerned, these technical standards are now in final form and have been passed to the European Commission as such. The Commission now has three months in which to endorse the standards. If the Commission decides not to endorse the standards, it can pass them back to ESMA, in which case ESMA will have a further six weeks in which to make the changes.
The need for an IT solution
Howells have developed IMTrack as some requirements make it clear that the use of paper records and spreadsheets will increase the risk of non-compliance with MAR:
- Any updates to the insider list must be date AND time stamped;
- Ability to submit an insider list to the competent authority in a required format AND to be able to do so for any point in time in the previous five years; - The requirement for insiders to acknowledge that they understand their duties and the penalties for breach.
Following our review of the Final Report, we set out below further clarification on areas that have been the subject of queries from clients:
Q. How should companies deal with insiders at third parties (e.g. printers and advisors)
Throughout the consultation period the debate was whether an issuer must maintain the list of insiders at third parties or whether the issuer could simply include the name of the third party firm and a contact name and leave it to the third party to keep their own list.
ESMA have re-confirmed that the responsibility for the provision of a full insider list (to include all insiders at a third party firm) remains with the issuer even if the third party is responsible for maintaining and providing their internal list to the issuer. Therefore, if the authorities request a copy of the insider list, the issuer must be capable of submitting an insider list containing only “natural persons”. As a consequence of this, all issuers will need to audit the insider list management of their third party suppliers to ensure that the third party’s internal insider list can be provided and integrated with the issuer’s insider list in a timely manner.
Q. Should we have one single list or multiple lists? How do we deal with permanent lists?
ESMA will allow the choice of two approaches. An issuer can either operate an insider list with deal specific sections which would show all persons who are insiders on a particular deal, or they can choose to also include a “permanent insider section” (typically including senior personnel) alongside the separate sections for each deal/project. If the permanent insider section approach is chosen, any person who is a permanent insider will not have to be included on each deal specific section but will be assumed to have knowledge of all projects. In our view it is likely that most companies will choose to operate a permanent insider section as this is most similar to current practice.
Q. Do I have to provide an exact list status at any time in the past?
Yes, this is a requirement unless the issuer is listed on an SME Growth Market (see further explanation below). The system used must be able to provide the insider list in the prescribed format showing the list status at any requested time over the past five years. Date stamping of any changes or updates must also occur.
Q. In what format would we have to provide information to the competent authority if requested?
ESMA has provided templates in the Final Report confirming the format for submission of the insider list sections and the permanent insiders section (if this option is used). Originally they suggested that MS Excel would be the required format but they have withdrawn this requirement and will now allow each competent authority to choose the required format and publish this on their website.
Q. How quickly do we have to update our lists?
Not fully clear. ESMA have said that they “support the argument” that the list should be updated on the same day as a change occurs but they are not mandating this. However, ESMA does state that “lists should be kept up to date at all times and not only upon receipt of a request from a competent authority”.
Q. Will the relaxation for AIM and other “SME Growth Markets” work?
The good news is that AIM and other SME Growth Markets are not required to comply with the new rules until 3 January 2017. In addition there is no requirement for an AIM company to continually maintain an insider list as long as it can provide a full list if it is requested by its competent authority.
The relaxation absolves the SME from the requirement to show the position of the list at any time over the past five years.
Although this appears helpful, when the list is requested, it must contain all the required information which will include, for example, a record of the dates on which each person became an insider and the date on which they ceased to have access to inside information. In order for this to be provided to the authorities without delay it seems that the SME will need to maintain a regularly up to date list otherwise it will not be able to indicate the date and time when participants became insiders etc.