Managers' Transactions – Restrictions and Notification Requirements
As was the case under the previous market abuse regime, MAR imposes various obligations on persons discharging managerial responsibility (PDMRs) in listed companies and their dealings in the securities of the company which they are connected to.
PDMRs of listed companies, and persons closely associated to them (PCAs), are under an obligation to notify both the issuer and the FCA of any transactions they (or their investment manager on their behalf) undertake in the issuer's securities. The notification must be made as soon as possible, and no later than three business days after the date of the transaction. MAR does contain a de minimis threshold of EUR 5,000 per year for the notification requirement to apply, but many listed companies are, as a policy decision, requiring disclosure of all transactions.
There is a mandatory form which must be used for notifications contained in Commission Implementing Regulation 2016/523/EU.
Restrictions on dealing
There are restrictions in place on transactions conducted by PDMRs (but not their PCAs) when the listed company is in a mandatory closed period (the 30 day period before the announcement of an interim report or year-end report). ESMA has confirmed in its Q&A document that preliminary results announcements will end the closed period as long as it contains all the key information relating to the financial figures expected to be included in the year-end report.
Listed companies are able to apply additional voluntary closed periods on PDMRs as a policy matter, where they consider it appropriate.
Exceptions to the dealing restrictions
There are very limited exceptions to the prohibition on PDMR's conducting transactions during closed periods. The stated exceptions are where there are "exceptional circumstances" which require the immediate sale of shares; certain transactions in connection with employee share or saving schemes, qualification or entitlement of shares; or where the beneficial interest in the shares does not change. The accompanying Delegated Regulation (2016/522/EU) provides further detail on these exceptions, including that the PDMR should demonstrate that the transaction could not have been executed at another time and that "exceptional circumstances" means "extremely urgent, unforeseen and compelling", for example a legally enforceable financial commitment or claim which the PDMR has no other way to satisfy other than by way of selling shares. The Delegated Regulation also provides a non-exhaustive list of circumstances in which the other exceptions will apply.
Interests in investment funds
The notification obligation and dealing restriction also apply where a PDMR holds an interest in a collective investment undertaking or portfolio which may have the issuer's securities as part of its underlying asset composition. This is because under MAR, the concept of a "transaction" is very broad, and can include transactions undertaken by an investment manager on behalf of the PDMR.
By way of exception to this principle, PDMRs and their PCAs are not required to make a notification when they (or their investment manager on their behalf) invest in a fund (or divest their interest) where certain conditions are met. The relevant conditions are where the PDMR or PCA obtains a unit or share in:
- a collective investment undertaking (or portfolio of assets) where exposure to the issuer's securities does not exceed 20% or more of the underlying assets; or
- an investment undertaking or portfolio of assets providing exposure to the issuer's securities, where the PDMR or PCA does not know and could not know the underlying investment composition, (although PDMRs and their PCAs should make reasonable efforts to find the information relating to the fund composition where it is available).
If a PDMR or PCA has invested in a fund where the investment manager had full discretion over investment strategy and decisions and does not receive any instructions or suggestions on portfolio composition from the investor, the PDMR or PCA does not need to notify transactions in the issuer's securities by such an undertaking.
Restrictions on dealing
If the issuer is in a closed period, a PDMR may not invest into a fund (or divest their interest) unless the conditions above are satisfied or one of the exceptions to the prohibition applies.