The MFSA has issued a circular on the Market Abuse Regulation (MAR), specifically on its findings following several onsite compliance visits which it has been conducting to assess issuers' compliance with the Regulation. We have prepared a brief summary of the MFSA's key findings and recommendations, which we set out below.
While the MFSA noted that by and large issuers have relatively good measures in place to mitigate their susceptibility to market abuse, the MFSA also noted that certain procedures need to be improved and enhanced. In particular, the MFSA has asked issuers to improve their communication with insiders and their persons discharging managerial responsibilities (PDMRs).
In its conclusions, the MFSA informed the industry that since MAR has been in force since 2016, at this point, it expects issuers to be compliant with all requirements of MAR. This, together with the MFSA's intention to carry out more onsite inspections, should serve as an important reminder to issuers to ensure that their house is in order and to address any shortcomings sooner rather than later – thereby avoiding unnecessary regulatory action.
Overview of MFSA's Circular on MAR – Onsite Compliance Meetings with Issuers: General Findings & Way Forward
The MFSA pointed out that some issuers which carried out market soundings failed to comprehensively comply with the marked sounding regime in MAR. In this respect, the MFSA was concerned that certain issuers undertaking market soundings only had rudimentary procedures in place which procedures do not adequately describe the manner in which market soundings are to be conducted.
It is pertinent to note that the market sounding regime is mandatory and issuers (and anybody acting on their behalf) who comply with some, but not all of their obligations risk losing the protection provided under the market sounding safe harbour under article 11 MAR (by virtue of which the disclosure of inside information during the course of a market sounding will not be deemed to be an unlawful disclosure) issuers will need to comply with all their obligations under MAR and the relevant delegated and implementing regulations. It is therefore of little use to comply with some, but not all, obligations when conducting a market sounding since by failing to comply with all their obligations issuers might risk losing the protection of the market sounding safe harbour.
Publication of inside information
The MFSA requested issuers to keep detailed minutes and records of their discussions and assessments through which they decide whether a piece of information is classified as inside information or otherwise. In view of this, issuers are well advised to be meticulous in all record keeping obligations as such records will help issuers defend decisions if these are ever questioned in the future.
In respect of issuers' obligation to publish inside information as soon as possible, the MFSA reminded issuers of their obligation to post and maintain such information on their websites for a period of at least 5 years. In this regard, article 3 of Regulation 2016/1055 provides that:
(a) issuers must allow users to access the inside information posted on their website in a non-discriminatory basis and free of charge;
(b) issuers must allow users to locate the inside information in an easily identifiable section of their website; and
(c) issuers must ensure that the disclosed inside information clearly indicates the date and time of the disclosure; and the information must be organised in chronological order.
Delayed disclosure of inside information
Interestingly, the MFSA has noted that only one issuer has resorted to the possibility to delay the disclosure of inside information under article 17(4) MAR (or article 17(5) for credit institutions). In our view, the possibility to delay disclosure in certain instances is an effective tool which issuers can use to mitigate the onerous obligation of having to publish inside information "as soon as possible". In this regard, issuers can delay disclosure if (a) immediate disclosure is likely to prejudice the legitimate interests of the issuer; (b) the delay of disclosure is not likely to mislead the public; and (c) the issuer can ensure the confidentiality of that information.
Lists of insiders
The MFSA reminded issuers that while temporary insider lists, which need to be kept on a deal-specific, event-specific or project-specific basis, are mandatory, permanent insider lists are discretionary. However, the MFSA re-iterated that it highly recommends the keeping of permanent lists to avoid multiple entries of the same individuals.
In addition, the MFSA noted that issuers are required to take all reasonable steps to ensure that any person on an insider list acknowledges in writing his/her/its legal and regulatory duties as an insider, and is aware of the sanctions applicable to insider dealing and unlawful disclosure of inside information. The MFSA encouraged any issuer in breach of this obligation to remedy the situation as soon as possible. Furthermore, the MFSA clarified that if a service provider is to be included in an insider list, and that service provider is a legal person, the issuer does not necessarily need to include all the service provider's employees who have access to the inside information on its insider list. Rather, the issuer can simply insert a contact person of that service provider and in so doing will be deemed to satisfy its obligations at law. The service provider will then be obliged to draw up its own list, containing details of all its employees who are privy to inside information relating to that particular issuer.
Other important points mentioned by the MFSA about lists of insiders:
(a) internal access to the lists must be restricted to those who need to access them to perform their job;
(b) while issuers are to provide their lists of insiders upon request, voluntary submission by issuers is encouraged and appreciated;
(c) lists must not be overwritten when they are updated, and should be kept for a period of 5 years.
In terms of article 19(5), issuers are obliged to inform PDMRs of their obligations under MAR and of the applicable sanctions. The MFSA has clarified that by simply providing employees with a link to the MFSA's circular on PDMR Notifications (dated 28 June 2019), issuers are not complying with their obligation set out under article 19(5) MAR. Issuers must therefore proactively inform PDMRs of their obligations and possible sanctions for non-compliance.
Furthermore, the MFSA also reminded issuers of their obligation to draw up a list of PDMRs and their PCAs – and to keep such lists updated.
The MFSA pointed out that it "considers staff dealing controls to be an essential tool for the control of inside information, specifically, for the prevention and detection of insider dealing and unlawful disclosure of inside information". In this regard, it noted that all issuers had a staff dealing policy in place, which policy is required to be kept by all issuers under Listing Rule 5.106.
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.