Market Abuse Regulations 2016 and the Disclosure and Transparency Rules

The Market Abuse Regulations 2016 (MAR) implement a common EU approach for preventing and detecting market abuse and ensuring a proper flow of information to the market. MAR, which came into force on 3 July 2016, introduced a number of changes to the disclosure rules. Although overall, the compliance requirements are largely unchanged, there has been a significant increase in the record keeping and reporting requirement.

In the UK, the most visible change for companies is the deletion of the Model Code from the Listing Rules and changes to the disclosure requirements of share dealing by persons discharging managerial responsibilities (PDMRs).

The primary obligation of companies under the Market Abuse Regulations relate to the control and disclosure of inside information and dealing by PDMRs (MAR 17–21). Investment firms have additional responsibilities to monitor and report investment transactions and suspicious activities for the prevention of market manipulation and other fraudulent activity.

MAR works in tandem with the Disclosure and Transparency Rules, and these have been updated to reflect changes introduced by MAR. DTR 4 and 6 apply to listed shares on a RIE (LSE Main Market or ISDX Main Board), and DTR 5 applies to companies with shares listed on a RIE or on a prescribed market. Accordingly, DTR 5 also applies to companies with shares admitted to AIM or ISDX Growth Market.

DTR 1, 2 and 3 have been deleted and replaced by MAR 16–19.

Inside information: disclosure and control

Under MAR 17:

• companies must publish ‘inside information’, via a RIS, that directly concerns them as soon as possible and must post and keep on its website, for five years, copies of all inside information publicly disclosed (MAR 17(1)).
• disclosure of inside information may be delayed if:

- immediate disclosure is likely to prejudice the company’s legitimate interests;
- delayed disclosure is unlikely to mislead the public; and
- the company can ensure the information remains confidential until it is disclosed (MAR 17(4));

• where a disclosure has been delayed, the company must notify the FCA of that fact immediately after the information has been disclosed, and provide an explanation if requested.

Inside information is information that:

• is precise;
• has not been made public;
• relates directly or indirectly to the company; and
• if made public, is likely to have a significant effect on the price of the company’s shares or securities (that is, information that a reasonable investor would be likely to use as part of the basis of their investment decisions) (MAR 7(1)(b)–(d)).

Other than in situations where the recipient owes a duty of confidentiality where a company or a person acting on its behalf discloses inside information to a third party in the normal course of employment or profession, there must also be complete public disclosure of that information simultaneously in the case of a planned disclosure, or as soon as possible in the case of a non-intentional disclosure (MAR 17(8)).

The ability to share inside information with those owing a duty of confidentiality can only be relied on where the recipient needs that information to provide services or advice to the company (DTR 2.5.7). Where a selective disclosure has been made, a holding announcement should be prepared for release as soon as possible in the event of a leak (DTR 2.6.3). Any holding announcement should contain:

• as much detail on the subject matter as possible;
• the reasons why a fuller announcement cannot be given; and
• an undertaking to announce further details as soon as possible (DTR 2.2.9).

Companies should have a framework for the control of inside information and establish effective arrangements to restrict access to inside information to those persons who require access to perform their job. A company should maintain insider lists in relation to employees and advisers with access to inside information (MAR 18).

Companies must have deal-specific or event-based insider lists, and may have a permanent insider list. To be entered on a permanent insider list, the individual will be assumed to have access to all inside information at all times. As a result, any permanent insider list is likely to be very short.

Deal-specific or event-based insider lists must be kept in electronic form, must adhere to the format laid down by the regulations, must be retained for five years and must be capable of being provided to the FCA as soon as possible on request (MAR 18(1)(c), 18(3) and 18(5)).

The minimum content for the insider lists is:

• identity of each person with access to the information;
• reason why the person is on the insider list;
• date and time that person obtained access to the information; and
• date on which the insider list was drawn up.

Companies are required to keep their insider lists up to date, and the list must also contain:

• date and time of any change in the reason for inclusion on the insider list;
• date and time any new person is added to the insider list; and
• date and time when a person ceases to have access to inside information.

All insiders must acknowledge in writing their legal and regulatory duties and that they are aware of the sanctions applicable to insider dealing and unlawful disclosure of inside information (MAR 18(2)).

Douglas Armour is Technical Director at Prism Cosec, part of Equiniti Group