In the event of a no-deal Brexit, changes will be made to UK law on the market abuse regulatory regime.
These changes are to be implemented by the Market Abuse (Amendment) (EU Exit) Regulations 2019 (UK MAR), which will become fully effective on the date of exit from the European Union (although certain elements came into force on 19 February 2019).
UK MAR is designed to ensure that UK markets and financial instruments continue to be subject to the same requirements and protections as under the Market Abuse Regulation (EU MAR), which was implemented in the UK through the Financial Services and Markets Act 2000 (Market Abuse) Regulations 2016.
- implemented measures to ensure integrity of the EU financial markets;
- enhanced investor protection and confidence;
- extended the regulatory reach of provisions from purely main market companies to AIM companies.
The new legislation will continue to enforce the main aspects of the old legislation, as well as making several changes. The territorial reach of UK MAR will be England, Wales, Scotland and Northern Ireland.
Despite the short period of time between now and 29 March 2019, companies are obliged to put reasonable measures in place to ensure they are compliant by exit day.
Overview of the changes
The dual purpose of UK MAR is to enable the UK to legislate on, and supervise, legislation in this area. With this in mind, some of the key amendments resulting are:
- Certain powers previously held by the European Securities and Markets Authority (ESMA) and the European Commission (EC) will transfer to the Financial Conduct Authority (FCA) as the domestic regulator in this area.
- The British Treasury will take over from the EC on responsibility for making supplementary legislation.
- There will no longer be an obligation for UK regulators to share information with EU authorities without guarantee of reciprocity. However, we will still be able to respond to requests for information from overseas regulators.
What requirements remain the same under UK MAR and EU MAR?
UK MAR will still cover the same scope of financial instruments trading, or admitted to trade, on UK and EU trading platforms. This is because, even in the event of a no-deal Brexit, a close cooperation on financial services offerings between the UK and the EU is envisaged. The following areas of EU MAR will therefore be incorporated into UK MAR with little substantive change:
- market soundings and insider lists obligations; and
- unlawful disclosure of inside information, insider dealing and market manipulation prohibitions.
What will be the key changes following the implementation of UK MAR?
Issuers with financial instruments admitted to trading or traded on a UK trading venue which are based in an EU member state will be required to do the following:
Article 17: Public disclosure of inside information
Although UK MAR retains broadly the same disclosure and notification requirements for inside information and delaying disclosure, it sets out slightly different reporting requirements. Issuers with financial instruments on UK trading platforms will need to:
- send to the FCA (as well as any EU competent authority under the requirements of EU MAR) any notifications on delayed disclosure of inside information; and
- ·obtain FCA consent for any delay of disclosure of inside information (again, this is in addition to obtaining the consent of any EU competent authority required under EU MAR).
Article 19: Managers' (PDMR) transactions
PDMRs of issuers with financial instruments on a UK trading platform will need to send PDMR transaction reports to the FCA, as well as to any EU competent authority under EU MAR. The content and format of these transaction reports will remain the same.
Article 5: Exemption for buy-back programmes and stabilisations
For reporting to benefit from the exemption for buy-backs and stabilisations under UK MAR for EU traded shares and securities, issuers must continue to report to the relevant EU competent authority. Note that this differs to the reporting changes for Articles 17 and 19 above.
To benefit from the same under UK MAR for shares and securities traded on UK trading venues, issuers must continue to report to the FCA.
What if we reach a deal?
If Britain succeeds in reaching a deal with the EU, there will be an implementation period until 31 December 2020 during which the UK will continue to adhere to EU legislation (including EU MAR). In such a situation, this note should be disregarded.
As it is not clear whether a no-deal scenario will arise, we recommend that you look out for further communications from the FCA, particularly any publications relating to changes they are making to their Handbook, the Binding Technical Statements relating to MAR and other related statutory provisions. We recommend that you regularly check the Treasury and FCA websites for updates as we draw closer to 29 March 2019.