British Virgin Islands: Cyprus Market Abuse Law - PDMRs And Closed Periods

Last Updated: 20 January 2017
Article by Nancy Erotocritou and Demetris Nicolaou

Most Read Contributor in British Virgin Islands, March 2017

On 14 October 2016, Cyprus enacted the Market Abuse Law No. 102(I)/2016 (the Law) implementing the Market Abuse Regulation 596/2016 (MAR) and abolishing the previous legislation. MAR has strengthened the EU market abuse regime, incorporating a wider range of, and tougher, sanctions. One of the provisions of MAR which attracted a lot of discussion relates to the responsibilities of persons discharging managerial responsibilities within an issuer (PDMR) and the obligations of persons closely associated with them (PCA) in relation to transactions on their own account in the issuer's shares, debt instruments, derivatives or other linked financial instruments.

MAR applies to financial instruments admitted to trading on a regulated market, traded on a multilateral trading facility or on an organised trading facility and transactions and behaviour relating to such instruments. The regulatory authority in Cyprus for matters relating to MAR is the Cyprus Securities and Exchange Commission (CySec).

Notification Requirements under Article 19 of MAR

A PDMR is defined in MAR as a person within an issuer who is either (i) a member of the administrative, management or supervisory body of that entity, (ii) a senior executive who is not a member of the administrative, management or supervisory body of that entity, who has regular access to inside information relating directly or indirectly to that entity and power to take managerial decisions affecting the future developments and business prospects of that entity.

PCAs include (i) a spouse, or a partner considered to be equivalent to a spouse in accordance with national law, (ii) a dependent child, in accordance with national law, (iii) a relative who has shared the same household for at least one year on the date of the transaction concerned, or (iv) a legal person, trust or partnership, the managerial responsibilities of which are discharged by a PDMR or by a person referred to in any of the three bullet points above, which is directly or indirectly controlled by such a person, which is set up for the benefit of such a person, or the economic interests of which are substantially equivalent to those of such a person.

The issuer must draw up a list of all PDMRs and PCAs and notify the PDMRs of their obligations under Article 19 in writing. PDMRs in turn must notify their PCAs of their obligations under Article 19 in writing and keep a copy of such notification.

PDMRs and their PCAs are required to notify the issuer and CySec of transactions conducted on their own account in the issuer's shares, debt instruments, derivatives or other linked financial instruments. In turn the issuer must promptly make the information public and no later than three business days after the transaction.

A de minimis exception to notification applies, being a transaction totalling up to €5,000 in a calendar year. The notification obligation applies only to any subsequent transaction once a total amount of €5,000 has been reached. The threshold of €5,000 is calculated by adding (without netting) all transactions referred to above.

Closed Periods

It is prohibited for a PDMR within an issuer to conduct any transactions on its own account or for the account of a third party, directly or indirectly, relating to the shares or debt instruments of the issuer or to derivatives or other financial instruments linked to them during a closed period. Note that the restriction applies only to PDMRs.

A closed period means the period of 30 calendar days before the announcement of an interim financial report or a year-end report, which the issuer is obliged to make public according to the rules of the trading venue where the issuer's shares are admitted to trading or national law. According to the Transparency Law N. 190(I)/2007 (as amended from time to time), an issuer whose home member state is Cyprus is required to publish an annual financial report and a half yearly financial report. A stock exchange where such an issuer has securities admitted to trading may require that additional financial reports are published.

On a strict interpretation of MAR and in cases where the issuer elects to voluntarily publish its financial results quarterly (rather than where such publication is mandatory), there is no requirement to implement a closed period for such voluntary quarterly results, although it is believed that many companies will choose to implement a closed period before such announcements.

The "announcement" is the public statement whereby the issuer announces the information included in an interim or a year-end financial report and the date of the "announcement" marks the end of the thirty-day closed period.

Typically, a Cypriot issuer may publish preliminary financial results in advance of the publication of the final year-end report. In such case difficulties may occur in determining the closed period for the year-end reporting. ESMA has clarified that the announcement of the preliminary financial results may be considered to be the announcement of the year-end report for the purposes of the closed period provided that it contains all the key information relating to the financial figures expected to be included in the year-end report. It would also not trigger another closed period if the information announced in such way changes after its publication.

Exceptions

An issuer may allow a PDMR within it to trade on its own account or for the account of a third party during a closed period either:

  1. on a case-by-case basis due to the existence of exceptional circumstances, such as severe financial difficulty, which require the immediate sale of shares (Exceptional Circumstances Exception)
  2. due to the characteristics of the trading involved for transactions made under, or related to, an employee share or saving scheme, qualification or entitlement of shares, or transactions where the beneficial interest in the relevant security does not change (Characteristics of Trading Exception)

The exception has been further explained in the Commission Delegated Regulation (EU) 2016/522 which clarifies that a PDMR within an issuer shall have the right to conduct trading during a closed period provided that the following conditions are met:

  1. one of the circumstances referred to above is met
  2. the PDMR is able to demonstrate that the particular transaction cannot be executed at another moment in time than during the closed period

Exceptional Circumstances Exception

As regards the Exceptional Circumstances Exception, prior to any trading during the closed period, the PDMR shall provide a reasoned written request to the issuer for obtaining the issuer's permission to proceed with immediate sale of shares of that issuer during a closed period.

When deciding whether to grant permission to proceed with immediate sale of its shares during a closed period, an issuer shall make a case-by-case assessment of a written request by the PDMR. The issuer shall have the right to permit the immediate sale of shares only when the circumstances for such transactions may be deemed exceptional.

Circumstances are considered to be exceptional when they are extremely urgent, unforeseen and compelling and where their cause is external to the PDMR and the PDMR has no control over them.

When examining whether the circumstances described in the written request are exceptional, the issuer shall take into account, among other indicators, whether and to the extent to which the PDMR:

  1. is at the moment of submitting its request facing a legally enforceable financial commitment or claim
  2. has to fulfil or is in a situation entered into before the beginning of the closed period and requiring the payment of sum to a third party, including tax liability, and cannot reasonably satisfy a financial commitment or claim by means other than immediate sale of shares

Characteristics of Trading Exception

The Commission Delegated Regulation (EU) 2016/522 clarifies under which circumstances the issuer has the right to permit a PDMR to trade within a closed period on the basis of the characteristic of trading exception. Broadly this covers employee scheme options or the acquisition of an entitlement to shares which, by virtue of the issuers by-laws, could not be acquired in another period outside the closed period.

Sanctions under the Law

CySec has the power to impose the following administrative sanctions for any breach of Article 19 of MAR:

  1. an order requiring the person responsible for the infringement to cease the conduct and to desist from a repetition of that conduct
  2. the disgorgement of the profits gained or losses avoided due to the infringement insofar as they can be determined
  3. a public warning which indicates the person responsible for the infringement and the nature of the infringement
  4. maximum administrative pecuniary sanctions of at least three times the amount of the profits gained or losses avoided because of the infringement, where those can be determined
  5. in respect of a natural person, maximum administrative pecuniary sanctions of at least €500 000
  6. in respect of legal persons, maximum administrative pecuniary sanctions of at least €1 000 000

Conclusion

Even though there are still areas of ambiguity with respect to Article 19, MAR has successfully introduced an updated market abuse regime. In practice, Cypriot issuers will have to familiarise themselves with the timing, electronic forms and submission processes that CySec will require for the reporting of PDMR transactions, which may be more onerous than their existing practices.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Mondaq Advice Centre (MACs)
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.