Introduction
What is Article 18 of MAR?
Article 18 of the Market Abuse Regulation (MAR) requires issuers and their advisors to maintain a list of all individuals who have access to inside information. This list must be available to the relevant National Competent Authority (NCA) (for example, the FCA in the UK) upon request. The issuer must ensure all individuals on the list acknowledge their inclusion in writing. Let's explore the definition, requirements, and practical implications of these insider lists.
What is an insider list?
An insider list is a record of all individuals with access to precise, non-public, price-sensitive information about a public company's financial instruments (for further information on what constitutes inside information, read here). These individuals could potentially use this information for insider trading, which MAR aims to prevent. The purpose of insider lists is to ensure transparency and help regulatory bodies investigate suspected market abuse. This proactive measure deters individuals from misusing sensitive information by systematically tracking and recording their access.
Requirements for insider lists
The European Securities and Markets Authority (ESMA) provides detailed guidance on the creation and maintenance of insider lists. The key requirements can be summarized as follows:
1. What information must be included on the list?
The list should include all employees, executives, consultants, or any other individuals who have access to inside information, whether on a regular or incidental basis. This includes board members, legal advisors, accountants, and potentially even family members if they can access such information. For each person listed, the following information must be recorded:
- Full name
- Date of birth
- National identification number (if applicable)
- Home address
- Contact details (telephone numbers, email)
- Date and time at which they gained access to inside information.
- Date on which they were added to the insider list.
- The reason for including them on the list.
- The date they ceased to have access to inside information (if applicable)
2. What format does the list need to be in?
Insider lists must be electronic, secure, and easily updated. They should be accessible to competent authorities (eg the FCA or national financial regulatory bodies) upon request.
3. How often should I update the list?
Insider lists must be updated promptly in the following circumstances:
▪ where there is a change in the reason for including a person on the list,
▪ to add a new person who has access to inside information, and
▪ where a person ceases to have access to inside information.
4. How long do I need to retain the information for?
Companies are required to keep insider lists (and all updates) for at least five years after they are created or updated.
Practical implications for companies to consider
Compliance
Companies must establish strict protocols to ensure the insider list is accurately maintained and securely stored. Non-compliance can lead to significant penalties.
Training and policies
Train staff on the confidentiality of inside information and the legal implications of insider trading. Establish clear policies on who can access such information and under what circumstances.
Data protection
Ensure personal data on insider lists is protected from unauthorized access, in compliance with the General Data Protection Regulation (GDPR).
Audits and checks
Conduct regular audits to verify the completeness and accuracy of insider lists. Be prepared for potential inspections by regulatory authorities.
Conclusion
Insider lists are a fundamental aspect of the compliance framework under the Market Abuse Regulation (MAR) aimed at curbing market abuse through transparency and accountability. By meticulously recording all individuals with access to inside information, companies can not only deter insider trading but also facilitate prompt and effective investigations by authorities when needed. The importance of these lists cannot be overstated, as they help maintain investor confidence and uphold the integrity of financial markets.
