#15678 - Mar Article 17 - Public Limited Companies

• MAR is designed to protect an orderly market

• Everyone gets information at the same time and no one has an unfair advantage.

  • Level 1 regulation is like primary legislation.

  • Level 2 is secondary legislation – the detail is delegated to these. Level 3 is ESMA guidelines.

• Listing Rule 7.1

  • The listing principles provide overarching principle that we must communicate property with our shareholders and no one can have an advantage

    • The listing principles in 7.2.1 apply to every listed company

    • The listing principles in 7.2.1A apply to premium listed companies

• Listing Principles in 7.2.1

  • Listing Principle 1 – must have adequate procedures to ensure you comply with its obligations

  • Premium Principle 6 – A listed company must communicate information in such a way as to avoid the creation of a false market in those listed shares

• One of our obligations to communicate may well be drawn from the duty in Article 17(1) MAR that requires us to communicate inside information (as defined in Article 7).

Does MAR Apply?

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

  • Includes AIM because MAR 2 specifies Multilateral Trading Facility

MAR Article 17(1) An issuer shall inform the public as soon as possible of inside information which directly concerns that issuer

• Are we an Issuer?

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

  • 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.

  • MTF catches both AIM and MM

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? (already established this above for MAR Article 17)

      • 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.

Therefore, we must disclose the inside information immediately under Article 17(1) unless exceptions apply in Article 17(4) so we can delay.

• MAR Article 17(4) – An issuer may delay disclosure to the public providing that all 3 of the below are met:

  • Immediate disclosure is likely to prejudice the legitimate interests of the issuer

    • ESMA Guidelines 3.2 – Non-exhaustive list of legitimate interests (narrowly interpreted as confidential for commercial reasons)

      • Jeopardising negotiations / Financial viability already in danger and this would push over edge

      • Potential IP registration outstanding

      • Planning to buy or sell something significant and this would jeopardise

    • DTR 2.5.5

      • Adds nothing but just says that whether or not issuer has legitimate interest is up to the assessment of the issuer themselves.

  • Delay of disclosure is not likely to mislead the public

    • ESMA 3.3 provides scenarios where the delay in disclosure is likely to mislead the public

      • Ensure that keeping quiet is not going to mislead the market

      • How the information is announced may affect the share price or negate negative movement

  • The issuer is able to ensure the confidentiality of that information

We’re allowed to delay under 17(4). What must we do next?

• MAR Article 17(4c)

  • Notify competent authority (FCA) that disclosure of the information was delayed

  • Provide a written explanation of how the conditions in 17(4) were met after info is disclosed to public

  • Why have you delayed? Up to each member state to decide if it requires this question to be answered:

    • FSMA Market Abuse Regulations (4)

      • In the UK, issuers only have to provide the explanation on request by the FCA

      • What information are we required to give them if they do ask why we are delaying?

        • 2016/522 Article 4

          • Date and time when inside information first existed within issuer

          • When you decided to delay

          • Who made the decision

          • Ongoing monitoring

          • Etc - Another element of detail in the secondary regulations that is required to FCA if they ask for it.

What happens if a rumour has got out?

• We were delaying under MAR Article 7(4):

  • DTR 2.7.1 - Assess the quality of this rumour – is the confidence broken? Is it too dangerous now to delay?

  • DTR 2.6.3 – create a holding announcement ready to go in the event of a leak saying we will get back to you ASAP.

  • DTR 2.2.9 – Holding announcement should

    • Detail as much of the subject matter as possible

    • Set out the reasons why a fuller announcement cannot be made

    • Include an undertaking to announce further details as soon as possible

• An announcement must be made now: MAR Article 17

  • Make announcement as soon as possible and maintain on website for 5 years

  • Issuer must ensure that the inside information is

    • Made public in the official way (i.e. via an RIS)

    • In a manner, which enables fast access

    • In a manner, which enables complete, correct and...