18 July 2016 by Henry Ker
The latest survey of the Governance and Compliance/Core community
The Market Abuse Regulation (MAR) came into effect on 3 July. The new regulation affects listed companies (although there are differences between the requirements for the separate markets − see this month's expertise article from Lorraine Young for guidance on AIM, and last month for Main Market compliance with MAR) and attempts to harmonise efforts in preventing market abuse across the EU.
There does, however, seem to be scepticism as to how successful the new regulation will be and if it really improves on the old Market Abuse Directive (MAD). We asked the Governance and Compliance/Core community whether MAR will have the desired effect on the financial markets.
Only about half responded with a definite answer (23% yes and 28% no), with a sizeable 49% reflecting the uncertainty surrounding the regulation by answering ‘maybe’. Respondents who are unclear said: ‘I am not sure what they were trying to achieve that the current rules in the UK did not already cover’, and another ‘I’m not entirely sure what was wrong with the MAD’. Others focused on the fact that an EU-wide legislation may not be the best approach: ‘It’s trying to apply EU legislation over a number of jurisdictions whose underlying legislation and practice differ. It does not fit well with all elements of UK practice and I do not think it is as fit for purpose as the established UK process’. Others suggested that it ‘Seems to just add further regulatory burden, more boxes to tick!’
This corresponds with the results of our next question, which asked if MAR would increase the regulatory burden, where there was a clear majority (72%) answering ‘yes’. 14% answered ‘no’ and the remainder (13%) ‘maybe’.
One respondent commented: ‘Massively – [we] have spent months working on this and anticipate weeks longer’. Another explained the sentiment around MAR as: ‘Yet more rules/laws to follow. There is in place a belt and braces and now a piece of string added.’
We also asked if there are flaws in the new regulation that have not been addressed. Several respondents brought up a range of issues, with problems around closed periods the most common mentioned. One explained: ‘The reduction in the ‘close’ period prior to announcement of results will lead to market abuse rather than reducing it. Most management teams have an indication of the period result at the time the period closes but audit and other factors (independent valuations) frequently delay announcement until closer to 60 days.’ Others also raised this issue, for example ‘The timing of close period for prelims and full report and accounts’, and another: ‘Closed periods and the fact that FCA guidance directly conflicts with the regulations.’
Confusion around clarification by the FCA is an issue raised by many, for example: ‘As with any new regulation, there are areas of uncertainty and some points of clarification remain to be addressed by the FCA.’ Although one did counter this, saying: ‘The FCA is aware of these and we are all awaiting further ESMA guidance’.
Other issues raised centre on persons discharging managerial responsibilities (PDMR), for example: ‘Too much detail required from individuals, personal data’; and also on the disclosure by PDMRs falling on the company: ‘PDMR needing to also make announcements [as it] will just end up being the company that does it,’ and ‘PDMRs are in reality unlikely to notify LSE themselves so perhaps this could have been proposed differently at the outset’.
|Read ICSA’s Guidance note, ‘Market Abuse Regulation (MAR) Dealing code and policy document’.|
Conducted in association with The Core Partnership