WHY MAR SHOULD BE ON YOUR AGENDA ?

The Market Abuse Regulation (MAR) provides the European legal framework any listed and stock-exchange company must comply with. Nothing new under the sun, nevertheless, the new and updated legislation applicable since July 2016 is still neglected & misinterpreted.

1. Goals & Objectives of the New Regulation

MAR has therefore, been in effect for a couple years now, so we’ve had time to observe the effect it has had, how companies have reacted and what are the biggest pitfalls and misconceptions.
“Sensitively, less than 17% of companies are fully compliant.”
This numbers reveals two main tendencies. The lack of awareness concerning the legal framework and inadequate compliance answers regarding requirements.
Therefore, through this article we’ll review a major common pitfalls of MAR : the case of inside information

2. Failing to identify inside information

The goal of any company should always be to publish all price sensitive information as soon as possible – (article 17 of MAR).

With all the information out in the open, investors can make fully informed investment decisions, and there’s less risk of unfair advantages and insider trading. In other words, not disclosing inside information is a serious breach. For example, at the end of 2017, the Financial Conduct Authority (FCA) in the UK fined Tejoori Limited for failing to inform the market of inside information relating to the sale of a subsidiary.
– Identify inside information
Inside information is any information of a precise nature which has not been made public and which, if it were made public, would be likely to have a significant effect on the price of an issuer’s shares or other financial instruments.
But it’s not always easy to determine what information would actually have an impact. Furthermore, the phrase “significant effect on price” does not imply that there’s a certain percentage threshold.
– So how does MAR helps us?
MAR states that the information is assumed to have a significant effect on the price if a “reasonable investor” would be likely to take it into account as part of an investment decision. Would the information be interesting to someone when deciding whether to buy or sell shares?
This is a bit theoretical so we instead suggest that you ask yourself: “Given the information that I have right now as an insider, if insider trading wasn’t wrong, would I act on this information?” If you wouldn’t, then chances are that the information doesn’t qualify as inside information just yet. Because not even you, knowing everything there is to know right now, are confident enough to act on it.
This is the starting point of compliance journey where processes must be formalized and documented following MAR requirements. Indeed, a second critical step is therefore to pinpoint the exact moment when an event became an inside information.

To have more information in French, please check our page on règlement MAR