One of the key provisions under the new Market Abuse Regulation (MAR), which applies from 3 July 2016, is an enhanced requirement to maintain insider lists.
Under the MAR, issuers or persons acting on their behalf must:
- Prepare a list of all those with access to inside information, to include both employees and advisors (for example, accountants and legal advisors).
- Maintain the insider list by updating it when required (for example, when an additional person accesses the inside information, or a person ceases to have such access).
- State the date and time when the change triggering the update occurred.
- Provide the insider list to the relevant competent authority (for example, the Central Bank of Ireland) as soon as possible upon its request.
Issuers are also obliged to take all reasonable steps to ensure that all those with access to inside information (“insiders”) acknowledge their duties in this regard and are aware of the applicable sanctions relating to insider dealing and the unlawful disclosure of inside information.
Precise content of insider lists
MAR does not introduce the obligation to maintain insider lists. There is a similar, albeit less prescriptive, requirement under the existing market abuse regime. However, the application of this requirement under the current regime has resulted in a lack of uniformity across Member States leading to increased costs and inefficiencies for issuers and advisors located in multiple jurisdictions.
The key change that MAR will bring about in the context of insider lists is that the level of information that will be required to be provided by the issuer will be more burdensome. In this regard, the European Commission has recently adopted an implementing regulation (to supplement the MAR) specifying the precise format of insider lists. Insider lists are required to be prepared on a deal-specific/event-specific basis, and maintained in electronic format in accordance with Template 1 of Annex 1 here. Further, issuers are given the discretion to maintain a supplemental list of “permanent insiders” who, due to the nature of their function, have access at all times to inside information. The permanent insider list should also be maintained in electronic format in accordance with Template 2 of Annex 1 here.
Specifying the exact form and content of the information to be provided is expected to ensure greater harmonisation across member states, which will benefit issuers and their advisors by reducing compliance costs.
Can ‘insiders’ deal in the issuer’s shares?
There are limited circumstances in which insiders can deal in the shares of the issuer. One example is where a person, in the normal course of their employment, is authorised to execute third-party orders and the dealing results from carrying out such transactions.
In light of the extremely limited scope for insiders to legitimately deal in the issuer’s shares, (and the express updating requirements under MAR), it is very important that insider lists are updated regularly. If an insider list is not promptly updated, a person could inadvertently fall foul of the prohibition on insider dealing despite not actually being in possession of inside information, all because the insider list that had previously shown him to hold inside information had not been updated to reflect the fact that he had ceased to hold such information.
Issuers and their advisors need to consider the necessary internal procedures required to ensure the initial preparation and subsequent prompt updating of insider lists. Issuers should also discuss with their advisors how best to manage the flow of inside information between their respective organisations. It is noteworthy that the issuer remains fully responsible for complying with the insider lists requirement even if the issuer’s advisors assume the task of preparing and updating the advisors’ own insider lists.
Contributed by Niall Keane