Market Abuse Regulation for Dutch listed companies

In the Netherlands, MAD is implemented in the Dutch Financial Supervision Act (Wet op het Financieel Toezicht). Because MAR is an EU regulation, its provision is directly applicable in the Netherlands and the market abuse provisions enshrined in the Dutch Financial Services Act are replaced.

The focus of this update is on the following topics that have changed or are new under the regime of MAR:

• public disclosure of inside information and the conditions for delay
• unlawful disclosure of inside information / market soundings
• insider lists, and
• managers’ transactions.

Public disclosure of inside information and conditions for delay

Under the MAR regime, the obligation for listed companies to publish inside information1 as soon as possible and the conditions for delay are essentially the same as under the previous regime, the conditions for delay being: 

• immediate disclosure is likely to prejudice the legitimate interests of the listed company
• delay of disclosure is not likely to mislead the public, and
• the listed company is able to ensure the confidentiality of that information.

In relation to delaying public disclosure of inside information MAR provides in addition that the following new requirements also apply:

• after the inside information is disclosed to the public, listed companies must immediately inform the Dutch Authority of Financial Markets (Autoriteit Financiële Markten, the AFM) that the disclosure of inside information was delayed
• listed companies must keep a written explanation of how the conditions of the delay were (and continued to be) fulfilled, and 
• listed companies must provide a record of such an explanation upon request of the AFM.

For listed companies, these new requirements mean that adequate internal policies should be in place for determining the moment on which inside information arises. Moreover, the decision to publish inside information, or not, and on which grounds, should be recorded strictly. This also applies in relation to the assessment and administration of interim events and (other) situations which give rise to the disclosure of inside information.

The AFM has published a brochure, Openbaarmaking van Voorwetenschap, on the disclosure of inside information that describes how listed companies are required to publicly disclose inside information and that also contains a list with examples of inside information. It also discusses in which situations public disclosure can be delayed and how the AFM should be informed about the delay. It further notes that if public disclosure is delayed, the company should in any case maintain record of:

• the date on which the inside information arose
• the date on which the decision to delay disclosure was taken
• the date on which the company expects to publicly disclose the information
• the identity of the persons that are responsible for the delay, including those responsible for monitoring the continued compliance with the requirements for the delay and the public disclosure of the information, and
• proof of continued compliance with the requirements for delay, each change during the delay, the possible sharing of the information or parts thereof during the delay and the procedures that apply in the event that the confidentiality of the information can no longer be ensured.

Separately the AFM has defined certain best practices regarding the drafting and publication press releases with inside information, Drafting and Disseminating Press Releases with Inside Information by Issuers - Best Practices. One of the best practices regards the appointment of a "disclosure committee": a fixed small group that meets regularly and ad-hoc to discuss the contents of press releases with inside information, to determine the moment of publication and to document potential delayed disclosure of inside information and that is composed of employees (eg a board member, the company’s legal counsel and the investor relations and communications officers) who are each placed on the company’s insider list.

Unlawful disclosure of inside information / market soundings

Similar to the previous regime, MAR prohibits a person to disclose inside information to any other person, except where the disclosure is made in the normal exercise of an employment, a profession or duties. As per MAR, market soundings (marktpeilingen) are deemed to be made in the normal exercise of a person’s employment, profession or duties, if the MAR requirements for market soundings are complied with. MAR defines a market sounding as the communication of information, prior to the announcement of a transaction, in order to gauge the interest of potential investors in a possible transaction and the conditions relating to it such as its potential size or pricing, to one or more potential investors. The following requirements should be met when conducting a market sounding:

• Prior to conducting a market sounding, it must be considered whether this involves the disclosure of inside information. In relation to each disclosure of information throughout the course of the market sounding the company must draw up a written record of its conclusion and reasons therefor and update its written records accordingly. 
• Prior to the disclosure of the inside information the company is required to obtain the consent of the receiving person to receive the information, and to inform such person on the applicable inside information rules and that by agreeing to receive the information he is required to keep the information confidential.
• The listed company is required to keep a record of all information given to the person receiving the market sounding, the identity of the recipient, the legal and natural persons acting on its behalf and the date and time of each disclosure.
• All records referred to above must be kept for a period of at least five years and must be send to the AFM upon request.

Insider lists

With the entry into force of the MAR listed companies are required to keep an insider list similar to the current regime under the Dutch Financial Services Act. MAR and the accompanying Commission Implementing Regulation 2016/347 of 10 March 2016 bring about several changes that are relevant for Dutch listed companies.

In the first place, under the new regime significantly more (personal) information must be included on the insider list that must be prepared and maintained by a listed company and any person acting on its behalf or account by using the template that is included in Annex I of the above-mentioned Commission Implementing Regulation. Secondly, all reasonable steps must be taken to ensure that any person on the insider list acknowledges in writing the legal and regulatory duties and sanctions imposed upon such persons. This constitutes a tightening of the previous rules, according to which it sufficed to inform the persons on the insider list of the above. The insider list must be submitted to the AFM on request.

Managers’ transactions

According to MAR, persons discharging managerial responsibilities2 (Managers), as well as persons closely associated with them (eg spouses and children), are required to notify the AFM and the listed company (the latter is new) of every transaction in financial instruments conducted on their own account (Managers’ transactions). Although the previous regime enshrined similar provisions in this respect, the following new requirements have arisen with the entry into force of MAR: 

• Managers’ transactions must be notified to the AFM as soon as possible and in any case within three business days after the date of the transaction (instead of five under the previous regime). The AFM subsequently makes the Managers’ transaction public through its publicly accessible register. 
• In addition to Managers’ transactions related to shares, also transactions related to debt instruments of the relevant listed company must be notified.
• A listed company is required to inform its Managers of their obligations under MAR in writing and must draw up a list of all Managers and persons closely associated with them. Managers are required to inform persons closely associated with them of their obligations under MAR in writing and must keep a copy of this notification.
• As a general rule, Managers are not allowed to conduct certain transactions in financial instruments during a closed period of 30 days before the publication of full year or interim financial results. Under the previous regime, different closed periods applied.
• MAR includes a non-exhaustive list of Managers’ transactions that need to be notified, including Managers’ transactions based on discretionary management agreements (which is contrary to the previous regime, which included an exemption for such transactions) and pledging.

Listed companies are advised to review to their internal policies and share dealing codes and change them to comply with the new regime. The same applies for employee share incentive schemes, also in view of the fact that the specific exemption from the insider dealing prohibition provided by the Dutch legislator in relation to the grant and exercise of personnel options shall be repealed because of MAR having become applicable.

Conclusion

In this update a brief overview is provided on the impact of the entry into force of the new market abuse regime under MAR in relation to Dutch listed companies. As several details of the rules, requirements and exemptions under this new regime must still be finalized, listed companies are recommended to keep an eye on developments that will occur in this respect.

1 The MAR defines several categories of "inside information". The following definition is most relevant for listed companies: "information of a precise nature, which has not been made public, relating, directly or indirectly, to one or more issuers or to one or more financial instruments, and which, if it were made public, would be likely to have a significant effect on the price of those financial instruments or on the price of related derivate financial instruments".

2 MAR defines a "person discharging managerial responsibilities" as: "a person within an issuer (…) who is: (a) a member of the administrative, management or supervisory body of that entity; or (b) a senior executive who is not a member of the bodies referred to in point (a), who has regular access to inside information relating directly or indirectly to that entity and power to take managerial decisions affecting the future developments and business prospects of that entity".