Market abuse regulations in the UK post Brexit

Since 01 January 2021, there have been two market abuse regimes: the EU regime under the EU Market Abuse Regulation (EU MAR) and a new UK market abuse regime (UK MAR). UK MAR is similar to EU MAR and has been designed to ensure that UK markets and financial instruments continue to be subject to the same requirements as under EU MAR (The Market Abuse (Amendment) (EU Exit) Regulations 2019 and explanatory notes).

On 6 September 2019, the UK regulations were amended by the Financial Services (Electronic Money, Payment Services and Miscellaneous Amendments) (EU Exit) Regulations 2019 to clarify that overseas territories are within the scope of the UK market abuse regime.

EU MAR/UK MAR

Differences at end of transition period

The changes include:

Scope

EU MAR continues to apply to financial instruments admitted to trading or traded on an EU trading venue. It also applies to financial instruments admitted to trading or traded elsewhere, where the price or value of those instruments depends on, or has an effect on, the price or vale of a financial instrument admitted to trading or traded on an EU trading venue. It no longer applies to UK trading venues.

UK MAR applies to financial instruments admitted to trading or traded on both UK and EU trading venues. UK or non-UK issuers with securities admitted to trading only on UK regulated market/MTF/OTF only need to comply with UK MAR. But certain issuers must now comply with EU MAR and UK MAR.

Issuer’s notification obligations

Under EU MAR an issuer has to make certain notifications to the relevant competent authority, including any delay in the disclosure of inside information, providing insider lists, if requested and reporting PDMR transactions.

Under UK MAR, issuers with financial instruments admitted to trading or traded on UK venues must make these notifications to the FCA. So, issuers that must comply with both EU MAR and UK MAR must now make notifications to two regulatory authorities (the FCA and one in an EU member state). For example, the notification that disclosure of inside information has been delayed, providing copies of an insider list; and notifying PDMR transactions.

Suspicious transaction reporting

UK MAR keeps the requirement for firms and venues in the UK to provide suspicious transaction reports to the FCA.

ESMA’s role

Functions relating to the preparation and making of regulatory or implementing technical standards have been transferred to the FCA to enable it to effectively enforce market abuse in the UK. The FCA has been designated as the UK regulator for the purposes of UK MAR.

See also the FCA's Primary Market Bulletin No21 and Primary Market Bulletin No 32.

Additional changes to EU MAR – effective 1 January 2021

The SME Growth Markets Regulation ((EU) 2019/2115) made various amendments to promote the use of SME growth markets, including changes to EU MAR that applied from 1 January 2021.

As these amendments took effect after the end of the transition period, they do not automatically apply to issuers on the UK SME growth markets (such as AIM and AQSE growth market). The UK has only made some of these amendments to UK MAR and there is divergence in practice between the UK and the EU.

The amendments to EU MAR are:

• PDMR transactions: the time period for all issuers to make public the details of a transaction after receiving notification from a PDMR (or PCA) has been increased to two business days of receipt of the notification (instead of the previous three days from the date of the transaction).

• SME delayed disclosure of inside information: an SME growth market issuer that decides to delay disclosure of inside information must still inform the competent authority that disclosure had been delayed but only needs to provide a written explanation of the grounds for the delay to the competent authority if requested.

  Previously an explanation had to be provided when the information was made public (unless the member state had required it only on request, which the UK has). So long as the SME growth issuer can justify its decision to delay, it will not need to keep a record of that explanation.

• Market soundings: the disclosure of inside information to qualified investors in connection with private placements of bonds has been excluded from the scope of the market sounding regime. The issuer must ensure that the qualified investors receiving the information are aware of, and acknowledge in writing, the legal and regulatory duties entailed and are aware of the sanctions applicable to insider dealing and unlawful disclosure of inside information.

• SME insider lists: the previous requirement for SME growth issuers to monitor each person who qualifies as an insider in the context of an ongoing project so that an insider list can be produced if requested by a competent authority has been replaced. The Commission concluded that in practice this required issuers to retain insider lists in much the same way as other issuers who are required to comply with MAR. And in practice most AIM companies have been maintaining insider lists for this reason.

  Instead, SME growth issuers must now prepare an insider list that includes persons who, due to the nature of their function or position within the issuer, have regular access to inside information. In effect, this means that SME growth market issuers only need to produce a list of permanent insiders.

  The Commission has also acknowledged that, where member states think it is needed to ensure a higher level of market integrity, they can require a fuller insider list to be produced but using a new template that has been developed by ESMA. On 29 October 2020, ESMA published its final report and the new template for these insider lists. It is in substantially the same form as the previous template save that some of the personal information is not required.

On 14 July 2022, a new EU regulation 2022/1210 was published in the Official Journal with the final templates for all insider lists and it repeals and replaces the previous Implementing Regulation (EU) 2016/347 that had the insider list templates in it. The new regulation comes into force on 3 August 2022.

• Persons required to prepare an insider list: the changes clarify that any person acting on behalf of, or for the account of, an issuer must produce and maintain their own insider lists - formalising what was already required under ESMA's Q&As on MAR.

There are also changes relating to liquidity contracts.

Additional changes to UK MAR

The following changes have been made to UK MAR with effect from 29 June 2021:

• Insider lists – to clarify that issuers as well as any person acting on their behalf or on their account must each draw up and maintain an insider list. This simply enacts what is already required in ESMA’s Q&As

• PDMR transactions – to increase the time period within which issuers must make public any PDMR transactions to within two working days of receiving notification of a transaction from the PDMR or PCA, instead of no later than three business days after the date of the transaction.

This means that UK issuers (including those on AIM) cannot benefit from all the amendments that apply to EU issuers. In particular, they cannot rely on the new market sounding safe harbour and AIM issuers do not benefit from the lighter touch insider list requirements. As the FCA does not require an explanation for the delay of inside information unless they explicitly request one, AIM issuers are, in any event, in the same position as their EU counterparts.

The UK has also amended the maximum sentences for insider dealing and market manipulation offences. The maximum sentence for insider dealing under the Criminal Justice Act 1993 and for the market manipulation offences in sections 89 to 91 of the Financial Services Act 2012 ((a) making false or misleading statements, (b) creating false or misleading impressions, and (c) making false or misleading statements or creating a false or misleading impression in relation to specified benchmarks) have increased from 7 to 10 years.