ESMA Feedback on Insider Lists under MAR

Introduction

The European Securities and Markets Authority (ESMA) has initiated a call for feedback from market participants to enhance the insider list regime under the Market Abuse Regulation (MAR). This initiative has brought to light several critical perspectives on how insider lists should be managed, focusing on the nuances between actual and potential access to inside information.

Proposed Amendments to Article 18 of MAR

Effective vs. Potential Access

• Clarification on Actual Access: Some market participants advocate that insider lists should exclusively include individuals who have directly accessed inside information. This approach aims to ensure that only those engaging with sensitive information are monitored, reducing unnecessary burdens.
• Challenges of Implementation: Conversely, other respondents highlight the practical difficulties in identifying every individual who accessed specific information. They suggest granting issuers the flexibility to determine who should be listed, possibly reverting to practices before MAR was enacted. This flexibility could alleviate the administrative burden and ensure more accurate tracking.

External Service Providers

• Data Provision Obligations: There is a consensus on the necessity for external service providers to furnish the required data to assist issuers in meeting their insider list obligations. This measure would streamline compliance and ensure that all relevant data is captured effectively.

Long-Term Service Providers

• Simplified Listing: Respondents propose that long-term service providers, such as auditors, should be included in a single list per engagement rather than multiple event-based lists. This simplification could reduce redundancy and enhance the efficiency of compliance efforts.

Emission Allowance Market Participants (EAMPs)

• Exemption Proposal: Some feedback suggests exempting EAMPs from maintaining insider lists, arguing that their inside information is often less critical compared to broader macroeconomic data. This exemption could reduce the compliance burden for these participants.

Timing of Insider List Creation

• Clarification Needed: Participants request clear guidelines on whether insider lists should be compiled at the generation of inside information or only when its disclosure is delayed. Such clarity would help issuers better align their practices with regulatory expectations.

Concerns with Commission Implementing Regulation 2016/347

Respondents have identified two primary concerns with the current regulation:

Reducing Information Requirements

• GDPR Concerns: There is significant support for reducing the amount of required information on insider lists, particularly data sensitive under GDPR. This reduction would help balance the need for market transparency with the protection of personal data.

Permanent Insider Section

• Perceived Issues: Many respondents view the permanent insider section as problematic, suggesting it complicates compliance efforts. Streamlining this section could alleviate some of the administrative challenges faced by issuers.

Feasibility of Tracking Actual Access

• ESMA also inquired about the feasibility of maintaining insider lists that identify individuals who have effectively accessed inside information within a short timeframe upon request. The feedback was predominantly negative, citing:

Technical Challenges and Costs

• Tracking Difficulties: Respondents highlighted the technical difficulties and high costs associated with tracking the exact moment individuals access information. This includes challenges like monitoring when a document is read, which can be complex and resource-intensive.

Impact on Small Cap Companies

• Cost Burden: The associated costs of stringent tracking would disproportionately affect smaller companies, potentially hindering their ability to comply effectively. These firms often have limited resources, making such requirements particularly burdensome.

Conclusion

The feedback collected by ESMA underscores the complexities and challenges of managing insider lists under MAR. While there is a clear call for more practical and less burdensome regulations, particularly concerning the distinction between effective and potential access to inside information, the need for flexibility and clear guidelines remains paramount. Addressing these concerns could lead to more efficient compliance processes, benefiting both market participants and regulators.

References

• ESMA Final Report on draft technical standards on the Market Abuse Regulation
• Market participants' feedback on MAR implementation (various consultation responses)

This detailed examination of ESMA's feedback request provides insights into the ongoing efforts to refine and enhance the insider list regime, balancing regulatory requirements with practical implementation challenges.