Market Abuse Regulation – the impact on AIM listed companies

The Market Abuse Regulation (MAR) comes into force and effect on 3 July 2016, replacing the existing market abuse regime. The new regime will survive (at least for a period) Brexit, so it is important that all AIM listed companies are aware of the impact and consequences of MAR.

Although some of the changes are quite subtle, there are a number of key changes that are likely to affect AIM listed companies which are summarised below.

Dealings by persons discharging managerial responsibilities (PDMRs) and persons closely associated (PCA) with them. 

Listed companies will be liable to fines and public censure where PDMRs fail to follow the rules around their dealings and should therefore ensure appropriate training is provided to PDMRs on their obligations.  Please contact me if this is something I can assist with.

• PDMRs are all persons discharging managerial responsibilities, not just directors.
• Every AIM company must have a reasonable and effective share dealing policy in place.
• PDMR/PCA must disclose dealings to the issuer and FCA within 3 business days of the transaction (compared to “without delay” under existing AIM rules). The issuer must also separately announce dealings within the same period.
• The range of dealings that need to be disclosed will be wider, for example covering debt instruments and related financial instruments as well as equity.
• There is a mandatory standard online form for the disclosure of dealings.
• Technically, disclosure only needs to be made once the value of dealings by a PDMR/PCA exceeds €5,000 in any calendar year.  However the board may opt to disclose all PDMR dealings as it may be simpler from a practical perspective and this is certainly my recommendation.
• Companies must notify PDMRs in writing of their obligation and PDMRs must notify their PCAs of their obligations.
• Companies must keep a list of all the PDMRs and PCAs.

Closed Periods

• Under MAR there will be new EU-wide mandatory “Closed Periods” during which PDMR dealing transactions are prohibited.  These closed periods are:
  • thirty calendar days before the announcement of the interim half year report; and
  • thirty calendar days before the publication of the year end report.
• There will be different exceptions to the prohibition of dealing during a closed period to those currently in force.  The current rules permit the sale of shares during a close period in order to alleviate server personal hardship, dealings where a director entered into a binding commitment prior to a close period, acceptance of a takeover offer and participation in a rights issue.  Under MAR, the company will only be able to permit PDMR dealings in closed periods:
  • in exceptional circumstances (for example severe financial difficulty);
  • where the dealing is pursuant to an employee share scheme and it is not possible under the terms of the scheme for the dealing to take place outside the closed period; and
  • where the dealing does not change the beneficial interest in the security.

Insider Lists

• The concept of Insider Lists remains broadly the same, but some additional requirements will need to be complied with, such as:
  • a new requirement to keep insider lists in a prescribed format which must include a National Identification Number for each insider, personal mobile numbers, date of birth and personal home address;
  • the introduction of “permanent insiders” as well as event driven insiders;
  • a requirement for the insider list to be maintained electronically, with the ability to retrieve prior versions and provide a copy of the FCA on request;
  • seeking acknowledgement in writing from insiders that they understand their legal and regulatory duties in relation to market abuse.

Market Soundings

• A new “market soundings” process will be introduced permitting the legitimate disclosure of inside information in certain circumstances.  For example in relation to possible fundraisings, transactions etc.
• A person disclosing information for the purposes of market sounding must:
  • assess whether there will be a disclosure of inside information;
  • write a note of its conclusion and the reasoning behind the decision;
  • inform the recipient of the consequences of possessing inside information and obtain his or her consent to being made an insider;
  • make a record of the information given, the identity of the recipient and the date and time of the disclosure;
  • notify the recipient when the information provided ceases to be inside information; and
  • retain the written records for a minimum of 5 years.

 Inside information  

• More prescriptive obligations will be imposed on issuers, including for example the obligation that companies must post and maintain on its website for a period of 5 years all inside information it is required to disclose publicly.

If you have any queries on the implications of the new Market Abuse Regulations please contact Matthew Cowan at Matthew.Cowan@bracherrawlins.co.uk