The Financial Services Authority ("FSA") has released a statement clarifying its position on the disclosure obligations of persons discharging managerial obligations ("PDMRs"). PDMRs include directors and their connected persons.
The FSA has confirmed that:
- the grant of security over shares (by the creation of a security interest such as a pledge, mortgage or charge) is covered by the disclosure requirements found in Chapter 3 of the Disclosure and Transparency Rules ("DTR 3");
- PDMRs must disclose all transactions which grant security over shares to their companies. The companies must then notify the market through a regulatory announcement;
- any security that has already been granted should be disclosed to the market as soon as possible; and
- enforcement action is not planned in respect of previous failures to notify.
The FSA made the statement in response to a large number of queries regarding the definition of a 'transaction in shares' for the purposes of DTR 3. There has recently been uncertainty in the market as to whether this definition would include grants of security over shareholdings. This uncertainty is reflected in the decision not to pursue enforcement actions at the present time. The FSA noted that DTR 3 is designed to implement the EU Market Abuse Directive, and that different approaches have been taken other member states. It hopes to reach a common understanding on the detail of the directive with the European Commission and the Committee of European Securities Regulators.
Although the FSA statement does not apply to them, directors of AIM companies should be reminded that granting of security will constitute a "deal" for the purposes of the AIM Rules and, pursuant to Rule 17 of the AIM Rules, AIM companies are required to disclose all "deals" by directors.
Issuers were also reminded that the grant of security is a 'dealing' in shares for the purposes of the Model Code (Annex 1 to Chapter 9 of the Listing Rules). PDMRs must therefore obtain clearance from their companies before using their shares as security.
Please click on this link for the FSA's statement