Market Abuse Guidance
The FSA is proposing to amend some of its guidance in MAR 1.4 (improper disclosure) to reflect feedback received from the industry.
In Market Watch 35 of last year the subject of the general market practice of disclosure of certain inside information by brokers was raised. The specific area of contention were deals in which stock owned by ‘persons discharging managerial responsibilities’ (PDMR) (the definition of the term can be found in FSMA s96B and includes directors and certain senior executives of an issuer). Market practice was based on the rationale that whilst such information would be regarded as ‘inside information’, potential buyers of a stock would expect their broker to disclose that the seller was a PDMR – a view which the FSA did not share.
Follow up discussions between the FSA and market participants show that the latter still consider the disclosure of such inside information to be acceptable despite the publication of Market Watch 35.
In the light of this, changes to the guidance in MAR 1.4.4 are suggested to the effect that passing such inside information is prima facie market abuse but there is an instance when it will not be considered as such when it relates to a sale by a PDMR. However, on the other side of the coin MAR 1.4.6 will set out guidance when PDMR status disclosure will be market abuse.
The above assumes that there has been no general announcement made in advance about the transaction as then, of course, it will no longer be regarded as ‘inside information’.
The proposal is currently in the consultation process: responses are invited by 6 February 2012.
The amendments to MAR 1.4 can be found in Appendix 6 using the link provided.