The new Market Abuse Regulation (MAR) introduces a more robust, wide-ranging and prescriptive regime for the notification of managers’ transactions than currently applies.
Article 19 of MAR obliges persons discharging managerial responsibilities (PDMRs) and persons closely associated with them to notify both the issuer and the relevant competent authority of every transaction (conducted on these persons’ accounts) relating to the shares or debt instruments of that issuer, or to derivatives or other financial instruments linked thereto.
Who is a PDMR?
A PDMR is:
- A member of the administrative, management or supervisory body of the issuer (or other specified entity); or
- A senior executive with regular access to inside information and the power to take managerial decisions affecting the future developments and business prospects of the issuer.
Who is a closely associated person?
A closely associated person is:
- A spouse, or a partner considered to be equivalent to a spouse under national law
- A dependent child
- A relative who has shared the same household for at least one year on the date of the transaction
- A legal person, trust or partnership, the managerial responsibilities of which are discharged by a PDMR or by a person referred to at (1) – (3) and which is:
- controlled by that person;
- set up for the benefit that person; or
- the economic interests of which are substantially equivalent to those of that person.
The notification requirements apply to a wide-range of transactions. For example, should a PDMR or closely associated person pledge or lend financial instruments in the issuer as collateral for a credit facility, this will amount to a notifiable transaction under MAR which is not the case under existing Irish market abuse law. Notifications must be made promptly and in any event no later than three business days after the transaction. PDMRs must notify closely associated persons, in writing, of their obligations under MAR and PDMRs must keep a copy of this notification.
Notification is not required until the transaction(s) reach a cumulative value of €5,000 within a calendar year. The competent authority of each member state has the power to increase this threshold to €20,000, but must inform the European Securities and Markets Authority of this decision and its justification in advance of the application of the threshold.
The issuer’s obligations
Issuers are obliged to ensure that the notifications they receive are promptly made public and in any event no later than 3 business days after the transaction. It is worth noting that MAR permits domestic legislation to provide for the competent authority, rather than the issuer, to make the notifications public. However, it is not yet clear whether Ireland will adopt such a provision.
Content of the notifications
MAR prescribes the information to be contained in notifications by PDMRs and closely associated persons to issuers and the relevant competent authority. This includes party names, the reason for the notification, a description of the financial instrument in question and the price and volume of the transaction. The European Commission has recently adopted an implementing regulation relating to PDMR notifications, which provides the template to be used for the notification of transactions. This template can be viewed here (at the Annex). As you will note, the template requires information on all transactions conducted on a particular day, both on an individual and aggregated basis.
MAR stipulates that, subject to limited exceptions, a PDMR must not carry out any transactions on its own account or for the account of a third party during a closed period of 30 days before the announcement of interim or year-end results.
Issuers should consider how their share dealing code will be affected by these rules. They should also prepare a list of PDMRs and closely associated persons, together with a procedure for ensuring that this list is accurately maintained at all times. Thought should be given to requiring PDMRs and closely associated persons to notify the issuer of all transactions carried out rather than just those above the value threshold so as to avoid an inadvertent breach by the issuer or, indeed, the PDMR or closely associated person.
Issuers should also consider whether it may be appropriate to set a shorter internal deadline for the notification of transactions, so as to ensure sufficient time to make the public disclosure within the 3 day timeframe.
Finally, issuers should offer training to PDMRs to ensure that they are fully aware of their notification obligations.