Listed companies, are you ready for the changes to the Market Abuse Regulation?

The Brexit transition period ends at 11pm on 31 December 2020, and, at this point, the UK will begin to decouple from the EU financial services regime – and companies listed in London that have operated under the UK Market Abuse Regulation (UK MAR) during the transition period will need to respond to changes.

UK MAR is essentially a transposed version of the EU Market Abuse Regulation (596/2014). In addition to setting out market abuse offences, the regulation has become familiar to issuers as the rulebook prescribing a number of ongoing compliance obligations including, amongst others, disclosure of share dealing and the maintenance of insider lists.

Draft legislation put before Parliament in the Financial Services Bill on 21 October 2020 introduces changes to UK MAR, and marks the first divergence from the existing EU rulebook for UK issuers.

The changes to UK MAR will take effect two months after the Bill becomes law (for obvious reasons, expected to be by 31 December 2020 at the latest), so issuers have a reasonable period of time to prepare. So what are the first post-transition changes for UK MAR?

Notifying dealings

The UK MAR changes reframe the market notification period for issuers. Under the amended UK MAR, persons discharging managerial responsibilities (PDMRs) will need to notify dealings in the issuer's securities to the issuer/Financial Conduct Authority within three "working days" of the transaction taking place (as opposed to three "business days" currently). This does not materially alter the PDMR obligation, but the definition of "working day" captures specific UK holidays including Christmas Day, Good Friday and other designated bank holidays.

More significantly – and in a welcome change to the existing regime – issuers now have two working days from receipt of the notification from the PDMR to make their back-to-back notification to the market of the dealing. Currently, both PDMRs and issuers are required to make their respective notifications within the same three-day window following the dealing, meaning that issuers will no longer have to scrabble to make a timely notification to the market if faced with a late notification from a PDMR.

Insider lists

The amendments to UK MAR also look to clarify the responsibilities for maintaining an insider list. The changes make it clear that issuers and any person acting on their behalf or on their account are all required to maintain an insider list (though where another person is asked by the issuer to draw up and update the issuer's insider list, the issuer remains responsible for compliance). This change is intended remove any confusion about who is required to maintain an insider list for third parties acting for an issuer.

Tougher sentencing

In addition to the changes to UK MAR, the Criminal Justice Act 1993 and the Financial Services Act 2012 will be amended to increase the maximum sentence for insider dealing offences and market manipulation offences from seven to ten years, bringing sentencing into line with comparable economic crimes under UK law. The effective date of these changes is yet to be appointed.

Osborne Clarke comment

There are a number of basic steps that listed companies should take in light of these changes.

The amended requirements for PMDRs to notify dealings mean that listed companies will need to review their share dealing manuals and internal compliance protocols to ensure they reflect the revised reporting timetable.

Issuers should continue to maintain their insider lists as they have done but should also remind any person acting on their behalf or on their account (including their professional advisers) to maintain an insider list as well.