#15676 - Mar Article 14 - Public Limited Companies

MAR Article 14 – Don’t Insider Deal and Don’t Tell Anyone Inside Information

Does MAR Apply?

• Apples to financial instruments submitted to a regulated market (MAR Article 2)

  • Includes AIM because MAR 2 specifies Multilateral Trading Facility

Definition of Market Abuse

• Market Abuse is a concept that encompasses unlawful behaviour on the financial markets (MAR Recital 7)

  • There is a prohibition on insider dealing and unlawful disclosure of inside information (MAR Article 14)

    • A person shall not:

      • Engage or attempt to engage in insider dealing

      • Recommend that another person engage in insider dealing

      • Induce another person to engage in insider dealing

      • Unlawfully disclose inside information

Insider Dealing occurs where someone: (MAR Article 8)

• Possesses inside information and uses that information to acquire, dispose, cancel, amend shares to which that info relates

• Recommends that a person engage in insider dealing or induces another person to engage in insider dealing (MAR Article 8(2))

  • To recommend or induce, someone must:

    • Possess inside information

    • Recommend on the basis of that information another person acquire or dispose, cancel or amend an order

    • And must know or ought to know that the recommendation or inducement is based upon inside information (MAR Article 8(3))

• They do not have to intend to commit market abuse (FCA MAR 1.2.3)

Is there inside information?

• MAR Article 7(1) – Information of a precise nature that’s not been made public relating directly or indirectly to issuer that if it was, would have an effect on shares

  • Information of a precise nature (MAR Article 7(2))

    • Indicates a set of circumstances which may / will / exists, specific enough to draw conclusions as to effect on the share price

    • There must be reasonable prospect event will occur and the info does not have to be entirely accurate (Hannan v FCA)

  • Not been made public

    • I.e. has not been disclosed via an RIS (FCA MAR 1.2.12)

  • Directly or indirectly related to issuer or to its shares

    • Is the company an Issuer?

      • MAR Article 3 Para 21 – Issuer is defined as someone who issues Financial Instruments on a multilateral trading facility (AIM and MM)

      • 2016/1055 Article 3 Para 1 – Points us towards below to define Financial Instruments

        • 2014/55 MiFID II Article 4(1) Para 15 – Financial Instruments are defined in Annex C

        • Annex C – Lists all types of ‘Transferable Securities’

          • Transferable Securities are Shares.

  • If made public would be likely to have a significant effect on the prices of those financial instruments

    • MAR Article 7(4) information a reasonable investor would be likely to use as part of the basis of his investment decisions

      • DTR 2.2.5 – Reasonable Investor Test says same thing

      • DTR 2.2.6

        • Cannot prescribe how RIT will apply in all situations

        • Take into account the anticipated impact of the information in the light of the totality of the issuer’s activities

        • Significant has no ‘magic percentage’ meaning but is subjective

        • Information considered relevant is information that affects

          • Assets and liabilities of the issuer

          • Performance of business or expectation of performance

          • Major new developments

      • (Massey v FCA) – Doesn’t require that the information have an actual effect on price but simply on the decision to buy or sell

      • The company itself together with advisors are the best people to make this decision (DTR 2.2.7)

‘We’ve found gold, but our leases show that any findings may be seized as this is aboriginal land under Australian law’ – this too is inside information as it could affect the reasonable investor.

Are they ‘Insiders’? (MAR Article 8(4))

• MAR Article 8 is applied to any person who is:

  • Members of administrative, management, supervisory bodies of the issuer and shareholders

  • People who have access to the inside information through the exercise of their employment, profession or duties

  • An outsider not related to the company who knows or ought to have known that they were now in possession of inside information (MAR Article 8(4))

• For the purposes of MAR only, a person means any natural or legal person (MAR Article 3(13)) (This is different to CJA where a company cannot be guilty)

Is there a defence? (MAR Article 9)

• Possession of the...