Market Abuse Regulation (MAR) - impact on issuers of asset backed securities

This article contains an overview of how disclosure obligations of issuers of asset backed securities listed in the EU are impacted by MAR.

What is MAR?

MAR is the new Market Abuse Regulation (596/2014/EU) which takes effect on 03 July 2016 across all EU Member States. As MAR is a regulation, it has direct effect in all EU Member States without the need for national implementation.

What is the scope of MAR?

For issuers of asset backed securities, the scope of the EU market abuse regime is significantly extended by MAR. Whereas the 2003 Market Abuse Directive was only applicable to issuers of securities admitted to trading on a regulated market, MAR is also applicable to issuers of securities admitted to trading on a multi-lateral trading facility (MTF), such as the Global Exchange Market of the Irish Stock Exchange plc, the EuroMTF market of the Luxembourg Stock Exchange or the Professional Securities Market of the London Stock Exchange.

How does MAR impact on issuers of asset backed securities?

Issuers of asset backed securities which are (or are expected to be) admitted to trading on a regulated market or MTF in the EU are subject to the requirements of MAR.

Although asset backed securities are in general issued by special purpose vehicles administered by professional corporate services providers, the obligations imposed by MAR are still applicable where the special purpose vehicle falls within the scope of MAR.

Some issuers of asset backed securities may have, in the past, chosen to admit their securities to trading on markets such as GEM or the EuroMTF so as not to fall within the scope of the continuing obligations imposed on issuers by EU directives. Going forward, as the provisions of MAR will apply to issuers of securities admitted to regulated markets and MTFs, this may have an impact on the listing venue of asset backed securities.

What are an issuer’s key obligations under MAR?

MAR prohibits insider dealing, market manipulation (attempted or actual) or the unlawful disclosure of inside information. In addition, MAR imposes obligations on issuers regarding (i) the disclosure of inside information (ii) establishment and maintenance of insider lists, and (iii) reporting of transactions by managers.

When should inside information be disclosed?

An issuer must disclose to the public, inside information which directly concerns the issuer. Such information must be disclosed to the public in a manner which ensures easy and quick access to it and must not be part of any marketing activities of the issuer. The information must be published on the issuer’s website and maintained for at least five years.

It should be noted that issuers of asset backed securities do not generally have websites.

MAR does allow for circumstances where disclosure may be delayed if certain conditions are met.

What is an insider list?

An insider list is a list of those who have access to inside information and who work for the issuer, whether as an employee or in another capacity, such as an accountant or advisor. Insider lists must be provided to the competent authority of an issuer upon request.

In the context of special purpose vehicles issuing asset backed securities, the directors of the issuer and employees of the corporate services provider could be named on an insider list for example.

The insider list must be in the prescribed form. In addition, issuers must ensure that individuals identified on an insider list acknowledge in writing their regulatory obligations under MAR and confirm their awareness of sanctions for breach of MAR. If an issuer delegates responsibility for the preparation and maintenance of insider lists to a third party, the issuer is still responsible for compliance with MAR.

What are an issuer’s reporting requirements under MAR?

In general, persons discharging managerial responsibilities (commonly known as “PDMRs”) and anyone closely associated with a PDMR must notify the issuer and the issuer’s competent authority of every transaction conducted on their own account relating to securities of the issuer. The issuer must then make public such transaction no later than three working days after the transaction date. ESMA has published a template for notifications made by PDMRs.

MAR introduces a minimum threshold for notification of transactions of €5,000 per calendar year. Discretion is given to competent authorities to raise that threshold up to €20,000. The UK Financial Conduct Authority has opted not to raise the threshold for transactions falling within its remit.

In the context of special purpose vehicles issuing asset backed securities, the PDMRs are likely to be the directors of the issuer.

What action should issuers of asset backed securities take?

Issuers of asset backed securities which are (or are expected to be) admitted to trading on both regulated markets and MTFs in the EU should take steps to:

  • adopt appropriate policies and procedures as regards dealing with inside information
  • establish a website for the purposes of disclosing inside information (if the issuer does not already have an existing website)
  • prepare insider lists and policies for the maintenance of such lists
  • adopt appropriate policies regarding transactions by PDMRs and closely associated persons, and
  • ensure that employees, PDMRs and closely associated persons are aware of and given appropriate training regarding their obligations under MAR and sanctions for breach.

Where can I find more information?

See our Market Abuse Regulation knowledge centre for more information on MAR.

This document (and any information accessed through links in this document) is provided for information purposes only and does not constitute legal advice. Professional legal advice should be obtained before taking or refraining from any action as a result of the contents of this document.