ESMA has published a consultation paper seeking views on various provisions of the Market Abuse Regulation (MAR). These include revisions to the protections created by the market soundings regime, an assessment of the usefulness of insider lists and the scope of the PDMR trading prohibitions.

We anticipate that the market will welcome further guidance in some areas eg. what is inside information and when does information become inside information. Comments are invited by 29 November 2019.

MAR review report

Proposals/questions raised by ESMA in this paper include the following:

Inside information

  • have market participants experienced difficulties with identifying what constitutes inside information and the moment when information becomes inside information.

Delaying disclosure of inside information

  • ESMA would like examples of difficulties encountered in the assessment of the conditions for delay ie. are the conditions well framed and sufficiently clear for issuers to effectively rely on this mechanism; and
  • whether a new, high-level requirement should be included in MAR, for issuers to have systems and controls for identifying, handling and disclosing inside information.

Market soundings

  • in light of different interpretations of Article 11, ESMA has clarified its view that, when carrying out a market sounding, Disclosing Market Participants are under an obligation to follow the requirements of Article 11 and in doing so, they will be granted full protection against the allegation of unlawfully disclosing inside information; and
  • amending Article 11 to establish administrative sanctions for not complying with the market sounding regime.

Insider lists

  • what changes, systems and controls issuers would need to put in place to be able to provide to competent authorities, within a short timescale, an insider list identifying the persons who actually accessed inside information. This point reiterates the recent findings of the FCA (Market Watch Issue No.60) that insider lists often include staff who did not actually access or need access to the inside information;
  • should others performing tasks and who have access to inside information be required to maintain insider lists even if they do not act on behalf of or on the account of the issuer e.g. auditors and notaries; and
  • as a result of an ‘inflation’ in the number of persons on permanent insider lists, is it useful to maintain this section?

PDMR transactions

  • to extend the application of the closed period to issuers and persons closely associated (PCA) with PDMRs. It is worth noting that it is common for share dealings code to prohibit dealings by PCAs during closed periods.

ESMA intends to submit a final report to the Commission by spring 2020.