On the admission of securities on a regulated market, issuers are subject to certain continuing obligations in terms of the Market Abuse Regulation (Regulation (EU) No 596/2014 of the European Parliament and of the Council of 16 April 2014 on market abuse (market abuse regulation) and repealing Directive 2003/6/EC of the European Parliament and of the Council and Commission Directives 2003/124/EC, 2003/125/EC and 2004/72/EC Text with EEA relevance) (the ‘Market Abuse Regulation’).
The Market Abuse Regulation aims to foster transparency and strengthen investor protection within European Union financial markets through the imposition of certain continuing obligations on issuers which can be broadly divided into the following:
- Insider Dealing
The Market Abuse Regulation prohibits the use or the recommendation/inducement of another to use inside information to deal in the securities to which the information relates, being information of a precise nature relating to the issuer or securities of the issuer which is not available to the public and which, if made public, would have an effect on the price of the securities. Furthermore, the use of the recommendations or inducements will also amount to insider trading where the person knows or ought to know that it is based upon inside information.
- Unlawful Disclosure of Inside Information
In terms of the Market Abuse Regulation, the unlawful disclosure of inside information arises where a person in possession of inside information discloses such information (except where disclosure is made in the normal exercise of their employment, profession or duties). The Market Abuse Regulation also prohibits the onward disclosure of recommendations or inducements by a person who knows or ought to know that it was based on inside information.
- Public Disclosure of Inside Information
The Market Abuse Regulation requires an issuer to inform the public as soon as possible of inside information which directly concerns that issuer, in a manner which enables fast access and complete, correct and timely assessment of the information, and the disclosure of inside information to the public shall not be combined with the marketing of its activities. Furthermore, this inside information is to be posted and maintained on the issuer’s website for a period of at least 5 years.
- Market Sounding
A market sounding under the Market Abuse Regulation is the communication of information to investors prior to the announcement of a transaction, to gauge the interest of potential investors.
- Insider Lists
The Market Abuse Regulation requires issuers to keep an up-to-date list of insiders; specifically, an issuer is to draw up a list of permanent insiders, working under an employment contract with permanent access to insider information, and a list of temporary insiders, preforming tasks through which they have access to inside information, such as advisers and accountants. Furthermore, an issuer must ensure that all persons included on the list of insiders acknowledge in writing their legal and regulatory duties and are aware of the sanctions applicable to insider dealing and unlawful disclosure.
- Persons Discharging Managerial Responsibilities (‘PDMR’) and Persons Closely Associated (‘PCA’)
The Market Abuse Regulation defines PDMRs as those persons within an issuer who are members of the administrative, management or supervisory body or a senior executive who has regular access to inside information and power to make managerial decisions affecting future developments and business prospects of the issuer. PCAs, on the other hand, are defined as persons closely associated to a PDMR, such as a spouse or partner, dependent child, relative sharing the same household or a legal person in which the PDMR or PCA has control, derives a benefit or has substantially equivalent economic interests. The Market Abuse Regulation imposes certain restrictions on transactions relating to the securities of the issuer by PDMRs and PCAs. Furthermore, an issuer is to keep an up-to-date list of all PDMRs and PCAs and is to notify PDMRs of their obligations and the PDMRs are, in turn, obliged to notify their PCAs of their obligations in terms of the Market Abuse Regulation.
In conclusion, on the admission of securities to listing an issuer needs to be aware of the increased regulatory obligations which it faces by virtue of the public nature of the securities and the resulting public nature of the company. Furthermore, an issuer must ensure that it is continuously compliant and up-to-date with its regulatory obligations.
VB Advocates provides guidance to companies that are looking to have securities admitted to listing, supporting them in navigating this intricate regulatory landscape and ensuring ongoing compliance with their respective obligations under the Market Abuse Regulation, amongst others. Get in touch to discuss how we can assist.
