CopiedThe ESMA MAR Review Final Report, Sep 2020 – Insider Lists and Market Soundings Takeaways

The 23 September 2020 ESMA MAR final report follows up on the 3 October 2019 Consultation Paper concerning the Market Abuse Regulation (MAR) review. Below are the key takeaways from the final report.

Inside Information and Delayed Disclosure Copied

• The current definition of inside information is deemed sufficiently broad to combat market abuse effectively. The conditions for delayed disclosure will not be amended.
• ESMA is prepared to provide more detailed guidance on the definition of inside information, particularly regarding intermediate steps of protracted processes and financial statements. Further practical examples of delayed disclosure scenarios will be provided.
• European issuers must invest in appropriate procedures, systems, and controls to comply with the delayed disclosure requirements under MAR Article 17.
• There will be no new obligation for issuers to notify NCAs of information that has lost its inside nature and for which disclosure was initially delayed.

Market Soundings Copied

• The market soundings regime will remain compulsory. MAR Article 11 will be clarified to ensure that a Disclosing Market Participant (DMP) carrying out a sounding must follow the requirements, thus gaining protection against unlawful disclosure.
• Pan-European sanctions for violations of market-sounding requirements will be introduced.
• The obligation for Market Sounding Recipients (MSRs) to assess their possession of inside information remains.
• All types of transactions currently included in the market soundings definitions will remain. This includes scenarios where a contemplated transaction does not materialize. However, there will be process alleviations, such as initial consent and cleansing requirements, for soundings where no inside information is disclosed.
• Recommended Amendments:
  • The cleansing requirement could be waived if a transaction is publicly announced.
  • Written minutes agreed upon via email or electronic means can suffice when recording facilities are unavailable.
  • The requirement to repeat wall-crossing reminders could be removed for follow-up calls.
• Recommendations for MSRs will be modulated based on the nature of the MSRs (e.g., natural vs. legal persons, regulated vs. non-regulated entities, SME vs. large cap).

Insider Lists, Delegated Lists, and Providers Copied

• Logwise has previously sought to clarify topics related to insider lists, delegated lists, and sublists. The final report identifies the need for clarity but stops short of providing definitive guidance.
• Insider lists must represent individuals who have effectively accessed inside information. Agents and providers with access must include individuals who, to the best of their knowledge, accessed the information in their lists.
• Issuers do not need to centralize the different lists. NCAs may request different lists from the issuer and agents.
• The issuer should include only the details of one contact person for each agent (if the agent is a legal person). Each agent must then include all natural persons (employees, etc.) with access in its sublist.
• MAR (Article 18) will be amended to clarify the issuer’s responsibility regarding insider lists, specifying which individuals and entities should be included.

Permanent Insider Section of the Insider List Copied

• The permanent insider section is optional and should only include a limited group of individuals. It should not replace the event-based insider list.

Administrative Reduction for Insider Lists Copied

• Issuers may store personal data separately, provided they can generate the insider list in the required format at the request of the NCA.
• Insider lists should be drawn up and updated promptly, with no difference between the issuer and external service providers or agents regarding this requirement.

Next Steps Copied

• The ESMA MAR Review final report was initially expected in spring 2020 but was postponed due to COVID-19-related workstream reprioritization. The report was submitted to the European Commission in late September 2020.
• ESMA will provide further technical assistance and guidance on applying the definition of inside information and specific scenarios concerning delayed disclosure.
• ESMA is also drafting regulatory technical standards and implementing technical standards on liquidity contracts and insider lists in line with the SME Growth Market Regulation mandate.

Logwise is closely monitoring these developments to keep stakeholders informed, particularly regarding the need for additional clarifications and guidelines.

Gain key insights from the ESMA MAR review—book a demo now to optimize your compliance strategy with Logwise.