MARKET ABUSE REGULATIONS

LSE issues consultation on changes to the AIM Rules ahead of MAR coming into force

The LSE has issued AIM Notice 44 in order to consult on proposed changes to the AIM Rules for Companies prior to the Market Abuse Regulation coming into force on 3 July 2016.  The key changes which affect directors/employees are proposed to:

  • AIM Rule 17 (Disclosure of miscellaneous information) – it is proposed that AIM Rule 17 is deleted and that instead new guidance to Rule 17 in respect of the disclosure of directors’ dealings will signpost an AIM company’s obligations under Article 19 of MAR.  The LSE considers that Article 19 provides an appropriate level of transparency and states that "it is expected that AIM companies through their existing compliance with Rule 17 should be able to transition to the new obligation under MAR".
  • AIM Rule 21 (Restrictions on dealing) – it is proposed that the existing provisions of AIM Rule 21 along with the associated definitions of “deal” and “unpublished price sensitive information” contained in the glossary are deleted.  In its place a new rule will be introduced requiring an AIM company to have a dealing policy.  The detailed content of the dealing policy will not be prescribed but instead the AIM Rules will set out the minimum provisions that the LSE would expect to be included in the policy.  Existing AIM companies will be expected to update their policies to ensure compliance with the proposed new rule by 3 July 2016.

The consultation closes on Thursday 12 May 2016.  A copy of AIM Notice 44 can be found here.

Addleshaw Goddard LLP to hold a series of seminars on MAR

MAR (together with its implementing legislation), repeals and replaces the existing Market Abuse Directive with effect from 3 July 2016. MAR, along with the Directive on Criminal Sanctions in Market Abuse, introduces a more robust EU market abuse regime.

We are running a series of seminars at our offices in London (am – 10 May 2016), Manchester (am - 26 May 2016) and Leeds (pm - 26 May 2016) looking at the key provisions of MAR and its impact on listed companies.  These seminars are aimed at Company Secretaries but may be of interest to a wider audience.  If you would like to attend one of the seminars, please email: nichola.griffin@addleshawgoddard.com for a formal invitation.

EXECUTIVE REMUNERATION

Executive Remuneration Working Party (ERWP) publishes interim report

The ERWP was established in late 2015 with the aim of reviewing and making final recommendations on the current structure of executive reward in listed companies, in the belief that the current approach to executive pay in UK listed companies is not fit for purpose, and has resulted in a poor of alignment of interests between executives, shareholders and the company.

In its interim report, published during April 2016, the ERWP has recommended that reward structures should be simple – meaning that they should be easily understandable for the participant, remuneration committees, investors and other stakeholders.  In addition, they should be aligned with the interests of shareholders and other employees, the company's performance and long term strategy and wider corporate and social responsibility goals.

The report also highlights that the current remuneration model in listed companies is very formulaic and is particularly critical of the adoption of long term incentive plans on the basis that this is standard market practice.  It suggests instead: (a) deferring bonuses into shares that vest over a significant time period; (b) granting awards based on performance over the previous three years, which vest three to five years after grant; and (c) annual grants of restricted shares, which vest based on continued employment.

Comments on the recommendations in the interim report are invited and the ERWP plans to hold discussions with stakeholders during May. It is anticipated that the ERWP will publish its final report in summer 2016, with the Investment Association indicating that it will consider the final recommendations made by the ERWP in its Principles of Remuneration.

A copy of the interim report can be found here.

TAX

HMRC issues consultation on employer NIC elections in respect of share schemes

Currently, where a chargeable event occurs in connection with employment related securities options and with restricted or convertible employment-related securities, a primary and secondary Class 1 NIC liability arises.  A primary Class 1 NIC is payable by the employee and a secondary Class 1 NIC is payable by the employer.  The secondary Class 1 NIC can (in these limited circumstances only) be transferred by the employer to the employee by either an NIC agreement or an NIC election.  With an NIC agreement the secondary Class 1 NIC liability remains with the employer and the employee agrees to indemnify the employer against this liability.  With an NIC election, the secondary Class 1 NIC liability transfers from the employer to the employee and it must be approved in advance by HMRC.

As approval for an NIC election is a paper-based process and HMRC is implementing a digital strategy aimed at reducing paper-based processes, HMRC is considering abolishing NIC elections and inviting views on the consequences of this. The closing date for comments is 13 July 2016.

The link to the relevant HMRC webpage is currently unavailable.

FINANCIAL SERVICES

PRA issues consultation on remuneration requirements under Solvency II Regulation

The PRA has requested feedback on a draft supervisory statement which sets out thePRA's expectations with regards to Article 275 of the Commission Delegated Regulation (EU) 2015/35 (‘the Solvency II Regulation’), particularly the requirements relating to the identification of key staff  and deferral of variable remuneration.  The draft supervisory statement is intended to support compliance with Article 275 and is designed to help ensure that the PRA meets its statutory objectives of ensuring safety and soundness of the firms it regulates and securing an appropriate degree of protection for policyholders.

The  consultation is relevant to all UK insurance and reinsurance firms and groups withinthe scope of Solvency II including the Society of Lloyd’s and managing agents (‘SolvencyII firms’).

The consultation closes on Thursday 2 June 2016.  A copy of the consultation can be found here

EBA issues remuneration practices benchmarking report and high-earner data

The EBA is required, under the terms of CRD IV, to benchmark remuneration trends at the European Union level and to publish aggregated data on high earners earning EUR 1 million or more per financial year. The competent authorities are responsible for collecting the relevant information from credit institutions and investment firms and for submitting it to the EBA.

The EBA has now analysed the data provided to it from across the EU for the year 2014, and compared it to the 2013 data.

A copy of the EBA report can be found here.