UK Market Abuse Regime Extends Its Reach: Implications for Issuers

by Morgan Lewis
Contact

Morgan Lewis

Companies trading on either the London Stock Exchange’s Main Market or AIM should ensure that their systems and procedures reflect changes to their disclosure and other obligations arising from the implementation of the new regime.

As featured in our 11 July LawFlash (UK Market Abuse Regime Extends Its Reach: Implications for Market Participants), the European Union’s Market Abuse Regulation (MAR) has replaced the previous regime under the Market Abuse Directive (MAD). MAR aims to ensure market integrity and investor protection by harmonising the disclosure requirements that apply to issuers across European markets. It has been effective since 3 July 2016.

The new regime extends to issuers that trade on the London Stock Exchange’s (LSE’s) Main Market as well as those that trade on a multilateral trading facility, including financial instruments for which an admission to trading on either market has been made. This means that companies traded on AIM are now caught directly by MAR and, unlike under MAD, the United Kingdom does not need to “gold plate” the regulation to specifically include AIM.

Elements of MAR that are particularly relevant to issuers and their managers include the following:

  • New rules on disclosure and protection of inside information
  • Obligations to maintain insider lists
  • Changes to the dealing restrictions that apply to persons discharging managerial responsibilities (PDMRs) and persons closely associated with them (PCAs)
  • Formalisation of market soundings provisions
  • Provisions on share buy-backs and stabilisations

Please refer to our previous LawFlash for further background on MAR and its extension of the market abuse regime.

Dual Regimes

Under MAR, listed issuers and their managers are subject to dual regulation within the United Kingdom: Main Market issuers will continue to comply with their obligations under the Financial Conduct Authority’s (FCA’s) Listing Rules, and AIM companies will remain subject to the AIM Rules for Companies (AIM Rules) as regulated by the LSE. Both Main Market issuers and AIM companies are also subject to obligations under MAR (which are regulated by the FCA). The LSE has emphasised that although there is overlap between the two obligations, MAR and AIM regulatory regimes must be treated separately. Advising on MAR is not the Nominated Adviser’s responsibility, and it will not be a defence to breaching the AIM Rules that legal advice on compliance with MAR was obtained. Given MAR’s wide applicability, issuers and managers located both within and outside the European Union must consider their obligations under MAR: any financial instruments admitted to trading on an EU trading venue will be caught, regardless of the issuer’s location.

Disclosure of Inside Information

The definition of “inside information” and an issuer’s obligation to publicly disclose it remain largely the same as under the previous regime. Delaying disclosure continues to be possible under MAR, but the new regime brings more onerous requirements for an issuer to effect these provisions. The following conditions for delay must be met:

  • Immediate disclosure is likely to prejudice the issuer’s legitimate interests
  • Delay of disclosure is not likely to mislead the public
  • Confidentiality can be ensured

The European Securities and Markets Authority (ESMA) provides a nonexhaustive list of circumstances in which legitimate interests may exist (including, e.g., ongoing negotiations) and also provides examples of where delay would likely mislead the public. The issuer must inform the FCA of the delay and keep a written record of the delay’s circumstances (and, on the FCA’s request, provide an explanation in writing about how the issuer met the conditions set out in MAR). Disclosure may no longer be delayed if any rumour arises that threatens the information’s confidentiality. Issuers should prepare a holding announcement where any disclosure is delayed. If there is a threat of a leak of information and an issuer is unable to make a holding announcement, the FCA has the discretion to suspend the issuer’s securities from trading.

PDMR Dealing

The Model Code in the Annex to Listing Rule 9 has been removed, and much of Disclosure and Transparency Rule 3 has been deleted and replaced by hyperlinks to the relevant MAR provisions. The provision on notification of directors’ dealings under AIM Rule 17 has been deleted, and under AIM Rule 21, AIM companies are now required to have a reasonable and effective dealing policy from admission. As a result of these changes, AIM companies now appear to be subject to more onerous obligations than those listed on the Main Market.

Definition of PDMR/PCA

MAR provides that PDMRs and PCAs must notify the issuer and the competent authority of every transaction conducted on their own account (whether by themselves, or, e.g., by a portfolio manager). The definition of PDMR remains largely the same as the definition previously set out in the Model Code, however, PDMRs and issuers should confirm whether any new persons will be caught by the PCA definition.

Notification

PDMR and PCA dealing notifications must be made no later than three business days after the transaction date. This is more restrictive than the four-day period under the previous regime. The period for PDMR and issuer notification run concurrently, therefore share dealing codes should be adapted to give the issuer sufficient time to notify the market once the PDMR’s initial notification is received.

De Minimis Provision

A de minimis threshold of €5,000 per calendar year has also been introduced to the PDMR/PCA dealing provisions, subject to an optional increase of up to €20,000 by the relevant authority. The FCA has indicated that it does not intend to adopt a higher threshold at present. Issuers should consider the best mechanism for monitoring dealings and whether to notify all dealings, including those that fall below this level.

MAR Closed Periods

MAR prohibits a PDMR from conducting any transactions on its own account or for a third-party account, directly or indirectly, during a closed period of 30 calendar days before announcing an interim financial report or a year-end report (which the issuer is obliged to make public under national law or the rules of the relevant exchange). Limited exemptions apply, including certain transactions relating to employee share schemes and transactions conducted in exceptional circumstances, such as severe financial difficulty, but these are not as extensive as those that applied under the Model Code. ESMA has confirmed that issuers will not be subject to two sets of closed periods (i.e., issuers will not be subject to a closed period ending on the publication of annual reports and accounts in addition to the closed period ending on the publication of preliminary results). This approach means that, in line with UK common practice, publication of preliminary results will end the closed period under MAR, provided that the year-end reports do not include any new key information.

Issuers should bear in mind that even if dealing does not fall within a closed period restriction, they must still consider other obligations under MAR.

Insider Lists

Article 18 of MAR requires issuers or any person acting on their behalf to provide to the FCA on its request a list of all persons who have access to inside information (with the rationale for including each person and the time when he or she obtained access to inside information). “Access to inside information” is not defined in MAR, and the provision therefore has a potentially wide application. Adequate procedures will be needed to identify potential individuals with access to inside information. Issuers may wish to consider creating a list of those with permanent access to inside information and a list for those with access on a case-by-case basis.

Regardless of who is charged with creating and maintaining the lists, the issuer or its manager remains responsible for taking all reasonable steps to ensure that those on the lists acknowledge in writing their legal and regulatory duties. Data protection legislation should be considered when creating lists, given that personal details, such as name, address, and national insurance number (where applicable), are required. Issuers whose financial instruments are admitted to trading on a small- and medium-sized enterprise (SME) growth market are exempt from this requirement, subject to conditions set out in the legislation. AIM companies may therefore have a potential exemption under the Markets in Financial Instruments Directive once it takes effect (should AIM be granted SME growth market status). At present, however, AIM companies will need to continue to maintain appropriate lists.

Market Soundings

MAR formalises the concept of market soundings and also sets out safe harbours for legitimate behaviour. A market sounding is the communication of information prior to announcing a transaction in order to gauge potential investors’ interest. The communication may be by an issuer or a third party acting on its behalf. Such communication will include a takeover situation if the information is necessary to enable the parties entitled to the securities to form an opinion on the offer, and the parties’ willingness to accept the offer is reasonably required for the decision to make the takeover or bid. Issuers should note that stake building will not fall under these provisions.

Before engaging in market soundings, issuers must keep written records of their assessments that specify whether the sounding will involve disclosure of inside information. The issuer will need to demonstrate that the recipient was informed that inside information was being given (and that therefore the recipient would be constrained by MAR from trading or acting on that information) and that the recipient consented to this. The issuer must inform the recipient as soon as the information ceases to be inside information. Evidence of compliance must be provided to the FCA on request, and records of the procedural steps taken must be kept for five years.

Share Buy-Backs and Stabilisations

Share buy-backs will fall within a MAR safe harbour, provided that 1) full details of the programme are disclosed prior to the start of trading, 2) trades are reported and disclosed, 3) limits and regulatory technical standards are complied with, and 4) any buy-back is carried out in accordance with the objectives set out in MAR. Stabilisations are also permitted subject to similar requirements, with the addition of a condition that the stabilisation is carried out for a limited period. The issuer must notify the trading venue’s competent authority of all stabilisation transactions’ details no later than the end of the seventh daily market session following the transactions. Buy-backs and stabilisations carried out outside these exemptions will not automatically constitute market abuse; however, any safe harbour will only apply if the issuer fulfils the conditions set out under MAR.

A Word of Warning

As discussed in our previous LawFlash, the United Kingdom’s previous market abuse regime was super-equivalent to the MAD obligations, and such super-equivalence was largely retained in its implementation of MAD, including the UK “gold plating” the regulation to extend it to AIM. Therefore we are of the view that Brexit is unlikely to result in any significant change in the current regime. Issuers should familiarise themselves with their dual regulatory obligations and inform relevant individuals of these. The obligations are separate, and compliance with one regulation will not excuse failure to comply with the other. For example, AIM companies should note that their obligations under AIM Rule 11 are in fact narrower than those under MAR.

Action Plan

Issuers should ensure that they have up-to-date policies on disclosure of inside information and PDMR dealings. Share dealing codes should be updated (and for AIM companies, these must be compliant with both MAR and AIM Rule 21). Insider lists should be updated and prepared in accordance with ESMA standards and in compliance with data protection legislation. Insiders and PDMRs should confirm in writing that they understand their obligations under MAR. PDMRs should identify PCAs and pass on relevant information. Responsible individuals should be identified or committees established to ensure disclosure compliance, and adequate record-keeping procedures should be put in place to ensure that disclosed inside information (to be kept on the issuer’s website), insider lists, and market soundings records are kept for at least five years. The issuer will also need to comply with ESMA technical standards. Crucially, issuers must remember that even if a safe harbour under MAR does apply, they will still need to comply with their obligations under the FCA Handbook and/or AIM Rules at all times.

 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Morgan Lewis | Attorney Advertising

Written by:

Morgan Lewis
Contact
more
less

Morgan Lewis on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
- hide

JD Supra Privacy Policy

Updated: May 25, 2018:

JD Supra is a legal publishing service that connects experts and their content with broader audiences of professionals, journalists and associations.

This Privacy Policy describes how JD Supra, LLC ("JD Supra" or "we," "us," or "our") collects, uses and shares personal data collected from visitors to our website (located at www.jdsupra.com) (our "Website") who view only publicly-available content as well as subscribers to our services (such as our email digests or author tools)(our "Services"). By using our Website and registering for one of our Services, you are agreeing to the terms of this Privacy Policy.

Please note that if you subscribe to one of our Services, you can make choices about how we collect, use and share your information through our Privacy Center under the "My Account" dashboard (available if you are logged into your JD Supra account).

Collection of Information

Registration Information. When you register with JD Supra for our Website and Services, either as an author or as a subscriber, you will be asked to provide identifying information to create your JD Supra account ("Registration Data"), such as your:

  • Email
  • First Name
  • Last Name
  • Company Name
  • Company Industry
  • Title
  • Country

Other Information: We also collect other information you may voluntarily provide. This may include content you provide for publication. We may also receive your communications with others through our Website and Services (such as contacting an author through our Website) or communications directly with us (such as through email, feedback or other forms or social media). If you are a subscribed user, we will also collect your user preferences, such as the types of articles you would like to read.

Information from third parties (such as, from your employer or LinkedIn): We may also receive information about you from third party sources. For example, your employer may provide your information to us, such as in connection with an article submitted by your employer for publication. If you choose to use LinkedIn to subscribe to our Website and Services, we also collect information related to your LinkedIn account and profile.

Your interactions with our Website and Services: As is true of most websites, we gather certain information automatically. This information includes IP addresses, browser type, Internet service provider (ISP), referring/exit pages, operating system, date/time stamp and clickstream data. We use this information to analyze trends, to administer the Website and our Services, to improve the content and performance of our Website and Services, and to track users' movements around the site. We may also link this automatically-collected data to personal information, for example, to inform authors about who has read their articles. Some of this data is collected through information sent by your web browser. We also use cookies and other tracking technologies to collect this information. To learn more about cookies and other tracking technologies that JD Supra may use on our Website and Services please see our "Cookies Guide" page.

How do we use this information?

We use the information and data we collect principally in order to provide our Website and Services. More specifically, we may use your personal information to:

  • Operate our Website and Services and publish content;
  • Distribute content to you in accordance with your preferences as well as to provide other notifications to you (for example, updates about our policies and terms);
  • Measure readership and usage of the Website and Services;
  • Communicate with you regarding your questions and requests;
  • Authenticate users and to provide for the safety and security of our Website and Services;
  • Conduct research and similar activities to improve our Website and Services; and
  • Comply with our legal and regulatory responsibilities and to enforce our rights.

How is your information shared?

  • Content and other public information (such as an author profile) is shared on our Website and Services, including via email digests and social media feeds, and is accessible to the general public.
  • If you choose to use our Website and Services to communicate directly with a company or individual, such communication may be shared accordingly.
  • Readership information is provided to publishing law firms and authors of content to give them insight into their readership and to help them to improve their content.
  • Our Website may offer you the opportunity to share information through our Website, such as through Facebook's "Like" or Twitter's "Tweet" button. We offer this functionality to help generate interest in our Website and content and to permit you to recommend content to your contacts. You should be aware that sharing through such functionality may result in information being collected by the applicable social media network and possibly being made publicly available (for example, through a search engine). Any such information collection would be subject to such third party social media network's privacy policy.
  • Your information may also be shared to parties who support our business, such as professional advisors as well as web-hosting providers, analytics providers and other information technology providers.
  • Any court, governmental authority, law enforcement agency or other third party where we believe disclosure is necessary to comply with a legal or regulatory obligation, or otherwise to protect our rights, the rights of any third party or individuals' personal safety, or to detect, prevent, or otherwise address fraud, security or safety issues.
  • To our affiliated entities and in connection with the sale, assignment or other transfer of our company or our business.

How We Protect Your Information

JD Supra takes reasonable and appropriate precautions to insure that user information is protected from loss, misuse and unauthorized access, disclosure, alteration and destruction. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. You should keep in mind that no Internet transmission is ever 100% secure or error-free. Where you use log-in credentials (usernames, passwords) on our Website, please remember that it is your responsibility to safeguard them. If you believe that your log-in credentials have been compromised, please contact us at privacy@jdsupra.com.

Children's Information

Our Website and Services are not directed at children under the age of 16 and we do not knowingly collect personal information from children under the age of 16 through our Website and/or Services. If you have reason to believe that a child under the age of 16 has provided personal information to us, please contact us, and we will endeavor to delete that information from our databases.

Links to Other Websites

Our Website and Services may contain links to other websites. The operators of such other websites may collect information about you, including through cookies or other technologies. If you are using our Website or Services and click a link to another site, you will leave our Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We are not responsible for the data collection and use practices of such other sites. This Policy applies solely to the information collected in connection with your use of our Website and Services and does not apply to any practices conducted offline or in connection with any other websites.

Information for EU and Swiss Residents

JD Supra's principal place of business is in the United States. By subscribing to our website, you expressly consent to your information being processed in the United States.

  • Our Legal Basis for Processing: Generally, we rely on our legitimate interests in order to process your personal information. For example, we rely on this legal ground if we use your personal information to manage your Registration Data and administer our relationship with you; to deliver our Website and Services; understand and improve our Website and Services; report reader analytics to our authors; to personalize your experience on our Website and Services; and where necessary to protect or defend our or another's rights or property, or to detect, prevent, or otherwise address fraud, security, safety or privacy issues. Please see Article 6(1)(f) of the E.U. General Data Protection Regulation ("GDPR") In addition, there may be other situations where other grounds for processing may exist, such as where processing is a result of legal requirements (GDPR Article 6(1)(c)) or for reasons of public interest (GDPR Article 6(1)(e)). Please see the "Your Rights" section of this Privacy Policy immediately below for more information about how you may request that we limit or refrain from processing your personal information.
  • Your Rights
    • Right of Access/Portability: You can ask to review details about the information we hold about you and how that information has been used and disclosed. Note that we may request to verify your identification before fulfilling your request. You can also request that your personal information is provided to you in a commonly used electronic format so that you can share it with other organizations.
    • Right to Correct Information: You may ask that we make corrections to any information we hold, if you believe such correction to be necessary.
    • Right to Restrict Our Processing or Erasure of Information: You also have the right in certain circumstances to ask us to restrict processing of your personal information or to erase your personal information. Where you have consented to our use of your personal information, you can withdraw your consent at any time.

You can make a request to exercise any of these rights by emailing us at privacy@jdsupra.com or by writing to us at:

Privacy Officer
JD Supra, LLC
10 Liberty Ship Way, Suite 300
Sausalito, California 94965

You can also manage your profile and subscriptions through our Privacy Center under the "My Account" dashboard.

We will make all practical efforts to respect your wishes. There may be times, however, where we are not able to fulfill your request, for example, if applicable law prohibits our compliance. Please note that JD Supra does not use "automatic decision making" or "profiling" as those terms are defined in the GDPR.

  • Timeframe for retaining your personal information: We will retain your personal information in a form that identifies you only for as long as it serves the purpose(s) for which it was initially collected as stated in this Privacy Policy, or subsequently authorized. We may continue processing your personal information for longer periods, but only for the time and to the extent such processing reasonably serves the purposes of archiving in the public interest, journalism, literature and art, scientific or historical research and statistical analysis, and subject to the protection of this Privacy Policy. For example, if you are an author, your personal information may continue to be published in connection with your article indefinitely. When we have no ongoing legitimate business need to process your personal information, we will either delete or anonymize it, or, if this is not possible (for example, because your personal information has been stored in backup archives), then we will securely store your personal information and isolate it from any further processing until deletion is possible.
  • Onward Transfer to Third Parties: As noted in the "How We Share Your Data" Section above, JD Supra may share your information with third parties. When JD Supra discloses your personal information to third parties, we have ensured that such third parties have either certified under the EU-U.S. or Swiss Privacy Shield Framework and will process all personal data received from EU member states/Switzerland in reliance on the applicable Privacy Shield Framework or that they have been subjected to strict contractual provisions in their contract with us to guarantee an adequate level of data protection for your data.

California Privacy Rights

Pursuant to Section 1798.83 of the California Civil Code, our customers who are California residents have the right to request certain information regarding our disclosure of personal information to third parties for their direct marketing purposes.

You can make a request for this information by emailing us at privacy@jdsupra.com or by writing to us at:

Privacy Officer
JD Supra, LLC
10 Liberty Ship Way, Suite 300
Sausalito, California 94965

Some browsers have incorporated a Do Not Track (DNT) feature. These features, when turned on, send a signal that you prefer that the website you are visiting not collect and use data regarding your online searching and browsing activities. As there is not yet a common understanding on how to interpret the DNT signal, we currently do not respond to DNT signals on our site.

Access/Correct/Update/Delete Personal Information

For non-EU/Swiss residents, if you would like to know what personal information we have about you, you can send an e-mail to privacy@jdsupra.com. We will be in contact with you (by mail or otherwise) to verify your identity and provide you the information you request. We will respond within 30 days to your request for access to your personal information. In some cases, we may not be able to remove your personal information, in which case we will let you know if we are unable to do so and why. If you would like to correct or update your personal information, you can manage your profile and subscriptions through our Privacy Center under the "My Account" dashboard. If you would like to delete your account or remove your information from our Website and Services, send an e-mail to privacy@jdsupra.com.

Changes in Our Privacy Policy

We reserve the right to change this Privacy Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our Privacy Policy will become effective upon posting of the revised policy on the Website. By continuing to use our Website and Services following such changes, you will be deemed to have agreed to such changes.

Contacting JD Supra

If you have any questions about this Privacy Policy, the practices of this site, your dealings with our Website or Services, or if you would like to change any of the information you have provided to us, please contact us at: privacy@jdsupra.com.

JD Supra Cookie Guide

As with many websites, JD Supra's website (located at www.jdsupra.com) (our "Website") and our services (such as our email article digests)(our "Services") use a standard technology called a "cookie" and other similar technologies (such as, pixels and web beacons), which are small data files that are transferred to your computer when you use our Website and Services. These technologies automatically identify your browser whenever you interact with our Website and Services.

How We Use Cookies and Other Tracking Technologies

We use cookies and other tracking technologies to:

  1. Improve the user experience on our Website and Services;
  2. Store the authorization token that users receive when they login to the private areas of our Website. This token is specific to a user's login session and requires a valid username and password to obtain. It is required to access the user's profile information, subscriptions, and analytics;
  3. Track anonymous site usage; and
  4. Permit connectivity with social media networks to permit content sharing.

There are different types of cookies and other technologies used our Website, notably:

  • "Session cookies" - These cookies only last as long as your online session, and disappear from your computer or device when you close your browser (like Internet Explorer, Google Chrome or Safari).
  • "Persistent cookies" - These cookies stay on your computer or device after your browser has been closed and last for a time specified in the cookie. We use persistent cookies when we need to know who you are for more than one browsing session. For example, we use them to remember your preferences for the next time you visit.
  • "Web Beacons/Pixels" - Some of our web pages and emails may also contain small electronic images known as web beacons, clear GIFs or single-pixel GIFs. These images are placed on a web page or email and typically work in conjunction with cookies to collect data. We use these images to identify our users and user behavior, such as counting the number of users who have visited a web page or acted upon one of our email digests.

JD Supra Cookies. We place our own cookies on your computer to track certain information about you while you are using our Website and Services. For example, we place a session cookie on your computer each time you visit our Website. We use these cookies to allow you to log-in to your subscriber account. In addition, through these cookies we are able to collect information about how you use the Website, including what browser you may be using, your IP address, and the URL address you came from upon visiting our Website and the URL you next visit (even if those URLs are not on our Website). We also utilize email web beacons to monitor whether our emails are being delivered and read. We also use these tools to help deliver reader analytics to our authors to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

Analytics/Performance Cookies. JD Supra also uses the following analytic tools to help us analyze the performance of our Website and Services as well as how visitors use our Website and Services:

  • HubSpot - For more information about HubSpot cookies, please visit legal.hubspot.com/privacy-policy.
  • New Relic - For more information on New Relic cookies, please visit www.newrelic.com/privacy.
  • Google Analytics - For more information on Google Analytics cookies, visit www.google.com/policies. To opt-out of being tracked by Google Analytics across all websites visit http://tools.google.com/dlpage/gaoptout. This will allow you to download and install a Google Analytics cookie-free web browser.

Facebook, Twitter and other Social Network Cookies. Our content pages allow you to share content appearing on our Website and Services to your social media accounts through the "Like," "Tweet," or similar buttons displayed on such pages. To accomplish this Service, we embed code that such third party social networks provide and that we do not control. These buttons know that you are logged in to your social network account and therefore such social networks could also know that you are viewing the JD Supra Website.

Controlling and Deleting Cookies

If you would like to change how a browser uses cookies, including blocking or deleting cookies from the JD Supra Website and Services you can do so by changing the settings in your web browser. To control cookies, most browsers allow you to either accept or reject all cookies, only accept certain types of cookies, or prompt you every time a site wishes to save a cookie. It's also easy to delete cookies that are already saved on your device by a browser.

The processes for controlling and deleting cookies vary depending on which browser you use. To find out how to do so with a particular browser, you can use your browser's "Help" function or alternatively, you can visit http://www.aboutcookies.org which explains, step-by-step, how to control and delete cookies in most browsers.

Updates to This Policy

We may update this cookie policy and our Privacy Policy from time-to-time, particularly as technology changes. You can always check this page for the latest version. We may also notify you of changes to our privacy policy by email.

Contacting JD Supra

If you have any questions about how we use cookies and other tracking technologies, please contact us at: privacy@jdsupra.com.

- hide

This website uses cookies to improve user experience, track anonymous site usage, store authorization tokens and permit sharing on social media networks. By continuing to browse this website you accept the use of cookies. Click here to read more about how we use cookies.