Delegated list vs subsidiary list - personal responsibility, pitfalls and practical tips

EU has released certain MAR alleviations related to SME Growth Markets (“SMEGMs”). It is clear that the SMEGM insider list alleviations will not apply to the obligations of persons with inside information acting on the issuer’s behalf or the issuer’s account (such as accountants, lawyers, rating agencies etc.). This is an important clarification meaning, inter alia, that the current obligations for such service providers (“advisers”) remain concerning their own lists, i.e. the subsidiary insider lists (“sublists”).

Initially, one must separate such advisers from three other categories obtaining inside information:
(a) the issuer’s own employees and/or management;
(b) auditors, notaries and other persons performing tasks through which they have access to inside information, still not acting on behalf or account of the issuer;
(c) M&A transaction counterparties.

Notably, the above three categories must currently not produce their own lists.

Categories (a) and (b) shall clearly be listed normally in the issuer’s own list. Category (c) shall principally not to be listed, since (c) does not perform tasks for the issuer. Yet, certain NCAs (e.g. Denmark) explicitly recommends that the issuer:
(i) specifies in its insider list the counterparty contact person and
(ii) notifies the counterparty that the information in question constitutes inside information (thereby still naturally respecting the MAR Art. 14 prohibition concerning unauthorized disclosure).

ESMA has recently communicated that time is ripe for certain MAR “changes or improvements”. ESMA intends to submit the final report to the EC in the spring of 2020. ESMA has however already in October 2019 released the MAR review consultation paper. ESMA is therein considering to oblige category (b) to produce sublists.

It is important to bear in mind that MAR (Art. 18) factually indicates two different kinds of lists kept outside of the issuer. The EU has conceded that the legislative technique is in this context not optimal, thereby resolving, through the October 2019 release of SMEGM amendments, to clarify the language slightly.
– Firstly, there is the above mentioned compulsory sublist obligation for advisers, which is integrated in the very same paragraph that stipulates also the compulsory insider list for issuers (i.e. Art. 18:1).
– Secondly, there is the “delegated list” (Art. 18:2): “Where another person acting on behalf or on the account of the issuer assumes the task of drawing up and updating the insider list, the issuer remains fully responsible for complying with this Article.” A delegated list is consequently indeed a special case, which merely actualizes in case an issuer uses the option to delegate keeping the issuer’s own list.

It is clear that there is an obligation to keep parallel lists:
(i) one by the issuer and
(ii) one by the adviser of the issuer (i.e. basically any person acting on behalf or account of the issuer having access to issuer inside information).

Concerning sublists, also the issuer shall importantly – in its own insider list – make notes about such an adviser. Annex I of Commission Implementing Regulation (EU) 2016/347 also indicates what information must be provided for such contact person in the issuer’s insider list. This entails, inter alia:
(a) that the adviser has been engaged;
(b) that inside information has been disclosed;
(c) the time of engagement or disclosure;
(d) the identity of the adviser contact person etc.

There is in this context no official, uniform, interpretation among the EU NCAs. In case of doubts, issuers and advisers should contact their respective local NCA and/or regulatory compliance specialist.

What needs to be especially carefully considered is the somewhat ambiguous field “Function and reason for being insider”. One method suggested by some NCAs is hereby to split it into e.g. three subheadings in the box: “Function: External auditor / Reason: Control of bookkeeping records / Comment: Keeps its own insider list”.

Correspondingly, there is also the slightly puzzling field: “National Identification Number (if applicable)”. Some NCAs thereby advise that in cases where there is no personal ID-number, the issuer shall instead inject the official corporate ID-number of the advisory firm. Notably the list format is only for natural persons – not legal persons. The adviser practice has thereby been to use, in their sublist, an adviser contact person.  

NCA investigations during 2019 have revealed that quite some issuers still fail to provide in their lists the respective adviser contact person. Such failure is a serious violation.

ESMA MAR Q&A now clearly indicates that advisers are personally responsible for the MAR sublist. It is therefore solely the adviser who is responsible for the sublist – not the issuer.

Still, naturally, where an issuer has also delegated its own list to an adviser, such adviser remains solely responsible for its sublist, whereas the issuer remains responsible for the requirements of its own delegated list.

It can consequently be concluded that the adviser sublists constitute a MAR area which is basically equally burdensome for advisers as for issuers, and also that sublists (especially in combination with delegated lists) entail also special considerations for the issuers. Logwise provides a solution.  

Learn more about SME Growth Markets developments

Learn more about subsidiary insider lists