The European Securities and Markets Authority (ESMA), the EU’s securities markets regulator, published a MAR Review Report on 24 September 2020. The Report is the first in-depth review of the functioning of MAR since its implementation in 2016.

ESMA ran a consultation in 2019 and the feedback from 97 respondents focused on requests for specific amendments and clarifications rather than requesting largescale changes to MAR, leading the Report to conclude that, overall, MAR has worked well in practice and is fit for purpose.

Insider Lists

Of particular interest to issuers are the Report’s conclusions on Insider Lists:

Is the insider list a key tool for investigating possible market abuse infringements? Should the insider list regime be amended to make it more effective?

ESMA takes the view that insider lists remain a key element to the investigation of possible market abuse cases while also providing benefits for issuers in relation to the management of inside information.

Should the scope of Article 18(1) of MAR (drawing up and maintaining the insider list) be expanded to include any person performing tasks through which they have access to inside information, irrespective of the fact that they act on behalf or on account of the issuer (such as auditors)?

ESMA considers that issuers and external advisors should include in their respective insider lists the persons who, to the best of their knowledge, have effectively accessed a piece of inside information. Where issuers are in doubt about the effective access of one or several individuals, ESMA considers that issuers and external advisors should include all individuals who could potentially have accessed a piece of inside information on their insider list. ESMA considers it may be useful to insert a clarification along these lines in a recital of MAR.

Is it useful to maintain the permanent insider section of the insider list?

ESMA concludes that the permanent insider section should remain an option available for those who want to make use of it.

Should Article 18 be revised to specify that the issuer should only include one contact for each external advisor having access to inside information, and that each external advisory firm should include in their own insiders list the natural or legal persons accessing that piece of inside information working for them under a contract of employment?

ESMA notes the difficulties experienced by issuers and their service providers when gathering personal data. It recommends that the administrative burden that insider lists entail generally be reduced, including by the amendment of Article 18 of MAR:

  • To clarify that the responsibility of the issuer strictly refers to the inclusion in its insider list of the following persons having access to inside information: persons working for it under a contract of employment; and its external service providers and, when the external service providers are legal persons, one contact natural person for each external service provider.
  • To specify that the persons acting on behalf or on the account of the issuer (and in due course, persons performing tasks for the issuer), when they have had access to a specific piece of inside information, are responsible for including in their own insider lists those persons working for them under a contract of employment, their own external service providers and, when the external service providers are legal persons, one contact natural person for each of them, when they had access to the piece of inside information at their turn.
  • To specify the obligation of persons acting on behalf or on the account of the issuer (and in due course, persons performing tasks for the issuer) to provide and keep updated the contact details of the natural person acting as contact with the issuer.

Inside Information

ESMA also considered the definition of inside information and the delayed disclosure of inside information. However, ESMA is not proposing any amendments to the definition of inside information on the basis that it allows for adequate protection of investors and market integrity.

ESMA also does not propose amending the conditions to delay disclosure of inside information but will provide further guidelines on the delay in the disclosure of inside information.

Persons discharging managerial responsibilities (PDMRs)

ESMA also consulted on and assessed the MAR thresholds and requirements for PDMRs including the scope of application of trading prohibitions. The report focuses on the closed period and on possible further exemptions for consideration by the European Commission.

ESMA recommends maintaining the thresholds currently provided by MAR for the notification of managers’ transactions and proposes to add further exemptions to the restriction from conducting transactions in the “closed period”. However, ESMA has dropped the proposed extension of the closed period to closely associated persons and to issuers as it considered it too burdensome compared to the benefit it could provide.

Howells view

Whilst it is useful to see ESMA confirm certain aspects of the functioning of MAR, particularly around the requirement for external advisors to maintain the personal data of their employees on their own insider list, of greater interest to UK issuers will be any guidance issued by the FCA at the end of the Brexit transition period, when ESMA’s powers and functions will be transferred to the FCA to enable it to enforce UK MAR to the extent necessary for a functional UK market abuse regime.

Next steps

The Report will be submitted to the European Commission and is expected to feed into their review of MAR. ESMA continues to provide further technical assistance to develop the legislative amendments suggested in the report.