The EU Market Abuse Regulation (MAR) takes effect on 3 July 2016 and repeals and replaces the EU Market Abuse Directive and its implementing legislation. MAR will introduce a new regime for market abuse (market manipulation and insider dealing) alongside new rules on disclosure of inside information and restrictions on dealings by, what are known as, persons discharging managerial responsibilities (PDMRs), and their associated persons. There are a number of differences in the new regime which will affect companies listed on AIM as well as those with a standard or premium UK listing.
The purpose of MAR is “to establish a more uniform and stronger framework in order to preserve market integrity, to avoid potential regulatory arbitrage, to ensure accountability in the event of attempted manipulation, and to provide more legal certainty and less regulatory complexity for market participants.”. As MAR is an EU Regulation, it will apply directly in the UK without the need for any domestic legislation to implement it. It has necessitated changes to the Financial Services and Markets Act 2000 and the Financial Conduct Authority (FCA) Handbook (including the Model Code, the Listing Rules and the Disclosure and Transparency Rules), for the UK to become compliant with the provisions in MAR.
The term ‘market abuse’ covers insider dealing, unlawful disclosure of inside information and market manipulation, and, for the first time, will cover attempted insider dealing and attempted market manipulation.
MAR is a highly technical piece of legislation but as far as AIM companies are concerned, the following should be borne in mind:
- Whilst there will be an overlap between the AIM Rules and MAR as regards inside information, the two will need to be considered separately. It will not be a defence to a breach of the AIM Rules that the AIM company has received legal advice that it was MAR compliant.
- MAR contains notification requirements which will apply to issuers, PDMRs and persons closely associated with them and also has mandatory close period rules. AIM companies will need to have in place systems and controls to manage these obligations. An AIM company’s compliance with MAR will not mean it will have automatically satisfied its obligations under the relevant AIM Rule.
- AIM companies will be required to maintain a list of all those persons working for them that have access to inside information. The FCA will be the competent authority for MAR in the UK and will be responsible for enforcing compliance with this provision. Although MAR includes provisions for issuers on SME Growth Markets to draw up a list only when requested by the regulator, the SME Growth Market regime will not into come into force until the Markets in Financial Instruments Directive (MiFID II) is implemented in January 2018. As AIM is currently not an SME Growth Market, AIM companies will therefore be required to comply with this aspect of MAR for the time being.
- MAR introduces a framework for persons to make legitimate disclosures of inside information in the course of market soundings. Changes will need to be made in relation to market sounding communications and record keeping obligations.