Article 18 of the Market Abuse Regulation (MAR) provides for the creation, maintenance and update of insider lists by issuers or any person acting on their behalf or on their account.
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14 July 2022
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It specifies that the insider list should comprise all persons "under a contract of employment or acting as advisers, accountants, credit rating agencies or otherwise performing tasks through which they have access to inside information, such as advisers, accountants or credit rating agencies".
Insiders' lists may potentially play a significant role in the carbon markets' proper and smooth functioning since this transparency tool is also mandatory, as Article 18(8) of the MAR envisions, in relation to inside information concerning emission allowances that arises in relation to the physical operations of emission allowance market participant - EAMP (note this term has legally defined meaning).
It means, practically, the insiders lists' requirement in the carbon market will mainly touch upon emitters above the respective significance thresholds of 6 million tonnes of carbon dioxide equivalent a year and a rated thermal input of 2,430 MW.
The second scope under the influence of the measure at issue, when it comes to carbon markets, are auction platforms, auctioneers and auction monitor in relation to auctions of emission allowances or other auctioned products based thereon that are held pursuant to the Auctioning Regulation (No 1031/2010).
The extension of the insiders lists' requirements to the carbon market represents a novelty, however, also the traditional, financial scope of this obligation has been significantly modified by the MAR, as its application has been swept to issuers who have requested or approved admission of their financial instruments to trading on a regulated market in a Member State or, in the case of an instrument only traded on an MTF or an OTF, have approved trading of their financial instruments on an MTF or an OTF or have requested admission to trading of their financial instruments on an MTF in a Member State (specific rules apply to SME growth markets, which are exempt from drawing up an insider list, provided certain conditions are met (cf. Art. 18 (6) MAR)).
Insider lists are an important tool for competent authorities when investigating possible market abuse. Insider lists may also serve issuers, EAMPs and auction entities to control the flow of inside information and thereby help manage their confidentiality duties. Among the purposes of MAR was the harmonisation of insider lists' design nad content, which in practice differed to a large extent across EU Member States. Hence, the legislative objective was to provide for a homogenous structure for insider list across the EU (ESMA's Final Report Draft technical standards on the Market Abuse Regulation, 28 September 2015 (ESMA/2015/1455), p. 60).
So, the said categories of entities fully affected by MAR are required:
(a) to draw up a list of all persons who have access to inside information and who are working for them under a contract of employment, or otherwise performing tasks through which they have access to inside information, such as advisers, accountants or credit rating agencies (insider list);
(b) promptly update the insider list; and
(c) provide the insider list to the competent authority as soon as possible upon its request.
They must also take all reasonable steps to ensure that any person on the insider list acknowledges in writing the legal and regulatory duties entailed and is aware of the sanctions applicable to insider dealing and unlawful disclosure of inside information.
Where another person acting on behalf or on the account of the entity under the statutory obligation assumes the task of drawing up and updating the insider list, the entity remains fully responsible for compliance. It has also always a right of access to the insider list.
ESMA in the Q&As underlined that not only the issuer but also all the persons acting on behalf or account of the issuer that have access to inside information relating to the issuer (e.g. advisors and consultants) are subject to the obligation to draw up, update and provide to the national competent authority upon request their respective insider list under Article 18 of MAR.
ESMA Securities and Markets Stakeholder Group (SMSG) in its Response to ESMA's Consultation Paper on Draft Technical Standards on the Market Abuse Regulation and on ESMA's draft technical advice on possible delegated acts concerning the Market Abuse Regulation notes that "the obligation to create an insider list only arises when an issuer delays disclosure of inside information (cf. Art. 17 (4) MAR) or when the inside information does not directly concern the issuer (cf. Art. 17 (1) MAR)".
MAR Recitals 56 and 57:
(56) Insider lists are an important tool for regulators when investigating possible market abuse, but national differences in regard to data to be included in those lists impose unnecessary administrative burdens on issuers. Data fields required for insider lists should therefore be uniform in order to reduce those costs. It is important that persons included on insider lists are informed of that fact and of its implications under this Regulation and Directive 2014/57/EU of the European Parliament and of the Council. The requirement to keep and constantly update insider lists imposes administrative burdens specifically on issuers on SME growth markets. As competent authorities are able to exercise effective market abuse supervision without having those lists available at all times for those issuers, they should be exempt from this obligation in order to reduce the administrative costs imposed by this Regulation. However, such issuers should provide an insider list to the competent authorities upon request.
(57) The establishment, by issuers or any person acting on their behalf or account, of lists of persons working for them under a contract of employment or otherwise and having access to inside information relating, directly or indirectly, to the issuer, is a valuable measure for protecting market integrity. Such lists may serve issuers or such persons to control the flow of inside information and thereby help manage their confidentiality duties. Moreover, such lists may also constitute a useful tool for competent authorities to identify any person who has access to inside information and the date on which they gained access. Access to inside information relating, directly or indirectly, to the issuer by persons included on such a list is without prejudice to the prohibitions laid down in this Regulation.
Insiders lists' content
The precise format of insider lists (as well as the format for the relevant updates) had been initially specified by the Commission Implementing Regulation (EU) 2016/347 of 10 March 2016 laying down implementing technical standards with regard to the precise format of insider lists and for updating insider lists according to Regulation (EU) No 596/2014 of the European Parliament and of the Council.
The said Regulation has been replaced by Commission Implementing Regulation (EU) 2022/1210 of 13 July 2022 laying down implementing technical standards for the application of Regulation (EU) No 596/2014 of the European Parliament and of the Council with regard to the format of insider lists and their updates.
Recital 56 of the MAR notes that data fields required for insider lists should be uniform in order to reduce unnecessary administrative burdens on issuers. According to the MAR itself the minimum content of the insider list (Article 18(3) and (4) of the MAR) should be:
(a) the identity of any person having access to inside information;
(b) the reason for including that person in the insider list;
(c) the date and time at which that person obtained access to inside information; and
(d) the date on which the insider list was drawn up.
Considering a trade-off between (i) data protection/privacy and (ii) administrative burden concerns on one side, and (iii) ability of competent authorities to effectively investigate on the other side, ESMA in the Final Report of 28 September 2015 proposed the following, detailed structure of the template for insider list:
a. Name: First name, surname, birth surname (if different from surname);
b. Company name and address;
c. Work direct line and work mobile telephone numbers;
d. Function and reason for being insider;
e. Date and time at which the person obtained inside information;
f. Date and time at which the person ceased to have access to inside information;
g. Date of birth;
h. 'National Identification Number' (where applicable in the concerned Member State);
i. Personal home and personal mobile telephone numbers;
j. Personal full address: street name; street number; city; post/zip code; country.
The above items have been finally transferred into the template of the insider list included in the Annex I to the Commission Implementing Regulation (EU) 2016/347 of 10 March 2016.
The identity of any person having access to inside information
ESMA in the Draft technical standards on the Market Abuse Regulation of 15 July 2014 (ESMA/2014/809) proposed to include the following information about the relevant person in the insider list to ascertain that identity:
- Name: First name, surname, birth surname;
- Home Address: Address, postal code and city, country;
- Work address;
- „National Identification Number‟ (if applicable, in accordance with national law), or otherwise, the date and place of birth;
- Home, work and mobile telephone numbers;
- Personal and work e-mail addresses.
However, market participants were rather sceptical on the extent of information ESMA initially proposed to include in the insider list and did not see a need for all the data required, to implement MAR.
Also the SMSG in the above-cited Response to the Consultation Paper expressed its concerns about an extensive information that EMSA intended to be provided on the insiders lists. The opinion reads in particular: "Some of SMSGs' members support the inclusion of private addresses, private email accounts and private telephone numbers but have doubts whether this is in line with Member States' personal data laws. In particular it is questionable whether the principle of proportionality is respected by ESMA's proposals. Protection of personal data is part of the fundamental right to respect private life under Article 7 and 8 Charter of Fundamental Rights. In accordance with settled jurisdiction of the ECJ, intervention is strictly limited. Some of SMSGs' members hold the opinion that an intervention cannot be justified with the integrity of the market and the detection of insider trading. The minimal content of the list should be the name and another identification data of the insider."
Moreover, ISDA input for ESMA's Consultation Papers on implementing measures under the Market Abuse Regulation of 15 October 2014 expressed its concerns as regards the proposed content of the insider list with the following remark:
"[w]e would not support the proposal, in particular regarding the inclusion of personal details such as national identification numbers (eg passport numbers), birth place, surname of birth, home address, mobile numbers and personal e-mail addresses in the insider list.
The inclusion of personal details in the insider list seems disproportionate and inadequate to the task of protecting the integrity of financial market as this information could be rapidly made available upon request".
ESMA initially advocated its stance emphasising the necessity of receiving adequate information to perform the task of protecting the integrity of the financial markets and detecting possible insider dealing. As ESMA argued, it was critical that competent authorities received sufficient information to determine whether people with access to inside information had connections with or had communicated at critical times with those who had undertaken suspicious trades - orders.
However, considering comments received and mindful of requirements for data protection, ESMA refrained in the Final Report of 28 September 2015 from including in the template for insider list items like professional and personal emails and employment/contract start and end dates. They are absent also in the template of the insider list included in the Annex I to the Commission Implementing Regulation 2016/347 of 10 March 2016.
The reason for inclusion on the insiders' list
Regarding the reason for inclusion on the list, ESMA considers it appropriate to include the function and employer's/company name (if an outside agent i.e. third party working for the issuer, the emission allowance market participant (EAMP) and the auction entity), of the insider on the insider list as the company name is relevant in making a distinction between the issuer, the EAMP or the auction entity, subsidiaries or professionals acting on behalf of its issuer or on its account.
According to ESMA the following categories of persons should be considered, indicatively, for the inclusion in the insiders list, as long as they have access to inside information: members of the management and/or supervisory board, executive officers such CEOs, persons discharging management responsibility, related staff members (such as secretaries and personal assistants), internal auditors, persons having access to databases on budgetary control, or balance sheet analyses, persons, who work in units that have regular access to inside information.
With respect to third parties working for the issuer, the emission allowance market participant or the auction entity, the following non-exhaustive list of categories of professionals, where these categories of professionals have access to inside information, should be included in the insider list: auditors, attorneys, accountants and tax advisors, managers of issuers (like corporate and investment banks), communication and IT agencies, rating agencies, investor relation agencies, investment analysts/journalists.
Date and time at which person obtained inside information and the date and time at which person ceased to have access to inside information
When recording the time, it is proposed that the relevant time zone should be specified (for example CET or GMT).
"Deal specific" and permanent insiders lists
It is noteworthy, ESMA proposed to offer some flexibility (later included in the Commission Implementing Regulation 2016/347 of 10 March 2016) to the issuers, EAMPs and auctions entities in the way they can draw up the insider list.
The approach is to require from an issuer, an EAMP and an auction entity to draw up the insider list in the form of Deal-specific/Event based sections, while allowing them to decide to also draw up, in addition, a separate and complementary section that will include only the permanent insiders:
a. Deal-specific/Event based sections: each of the sections relate to a particular piece of inside information and include all the insiders in respect to that information. For the avoidance of doubt, the event referred to is the coming into existence of inside information which may or may not correspond to a temporal or contractual event.
b. Permanent insider section: relating to insiders who are considered insiders in respect of all types of inside information, for example, due to the nature of their function or position within the organisation. Permanent insiders will not have to be reported also on each and every Deal-specific/Event based sections.
All the sections together (including the permanent insider one if any) will form the whole insider list of the issuer, EAMP or auction entity.
Insiders that are included on the permanent insider section are considered to have access to all inside information within the issuer, EAMP or auction entity and to be insiders during the entire duration of the period of existence of the inside information.
When a permanent insider is included on a permanent insider section while inside information already exists, the permanent insider is considered to be insider from the moment he/she joins the permanent insider section: a specific field is therefore included in the template.
In the ESMA's opinion, this approach provides flexibility and reduces the burden of recording all those persons having access at all times to all the inside information within the entity, which could include the executives running the daily business of the issuer (e.g. the CEO), on each individual deal specific/event based insider section (ESMA's Final Report of 28 September 2015, p. 61).
The ESMA underlined (ESMA Consultation Paper of 3 October 2019, MAR review report, ESMA70-156-1459, p. 50) that insider lists should only include persons who effectively accessed a piece of inside information, and not those who could have done that. In support of the above stance ESMA invoked, in particular:
- recital (57) of MAR indicates that insider lists must contain persons who “gained access” to inside information, not those who might have done that because they had the technical capacity/access to do so;
- Commission Implementing Regulation (EU) 2016/347, which requires specifying the ‘date and time at which a person obtained access to inside information’ and the same in case the person ceased to have access to inside information’;
- the obligation to manage adequately inside information so as to permit access to it on a ‘need-to-know’ basis.
In line with that, ESMA observed not to be in line with the obligations set out in MAR:
- using the permanent insider section as a substitute of the event-based insider lists.
- to ‘inflate’ the scope of persons included in permanent insider list.
ESMA referred to recital 4 of Commission Implementing Regulation (EU) 2016/347, pursuant to which permanent insider list can only include “persons who, due to the nature of their function or position, have access at all times to all inside information within the issuer, the emission allowance market participant, the auction platform, the auctioneer or the auction monitor”. In ESMA’s view, “only an extremely limited group of individuals should meet that definition, including the Chief Executive Officer, in certain specific cases, the Chief Finance Officer, Executive assistant, Chairman of the Board, Head of Legal Department/Compliance Officer and Chief Technical Officers”.
Language of the insider list
The ESMA initially proposed in the Consultation Paper on MAR implementing acts that the insider lists should be submitted in the official language of the relevant competent authority or in a language which is customary in the sphere of international finance, providing thus an option to the issuers, the EAMPs and the auction entities as well as to persons acting on their behalf or on their account.
However, after further review, due to the scope of the empowerment for the insider list implementing technical standards (formats), ESMA refrained from including provisions on language in the final draft law.
Updates
Article 18(4) of the MAR states the circumstances, in which the insider list should be updated. Accordingly, the insider list must be updated promptly, including the date of the update, in the following circumstances:
(a) where there is a change in the reason for including a person already on the insider list;
(b) where there is a new person who has access to inside information and needs, therefore, to be added to the insider list; and
(c) where a person ceases to have access to inside information.
Each update needs to specify the date and time when the change triggering the update occurred.
Transmission of the insider list upon request
For the transmission of the insider list to the requesting competent authority, issuers, EAMPs and auction entities have to use the Template 1 included in Annex I of the Commission Implementing Regulation 2016/347 of 10 March 2016, filled in all its parts.
If a permanent insider section has been prepared as a complementary section of the insider list, it has to be sent to the competent authorities every time they request the insider list using the Template 2 in Annex I of the said Regulation.
In relation to the means of transmission, the Commission Implementing Regulation 2016/347 of 10 March 2016 clarify that the electronic means to be used has to be specified by the competent authorities on their website.
The electronic means selected by the competent authority should ensure that completeness, integrity and confidentiality of the information are maintained during the transmission as the information included in the insider list is sensitive. According to the aforementioned Regulation, issuers, EAMPs and auction entities will have to check the competent authority website and use the means identified there.
SME-growth market issuers
Article 18(6) of MAR exempts issuers whose financial instruments are admitted to trading on a SME growth market (SME issuers) from the obligation to draw up (and update) an insider list provided that:
a. they take all reasonable steps to ensure that any person with access to inside information acknowledges the legal and regulatory duties entailed and is aware of the sanctions applicable to insider dealing and unlawful disclosure of inside information, and
b. they are able to provide the competent authority, upon request, with an insider list.
Initially ESMA proposed to require SME issuers to provide upon request a similar insider list, in terms of content, to the one used by non-SME issuers, as the risks of non-compliance with the provisions of MAR by SME issuers are the same (if not higher) than for non-SME issuers. Similarly, the formats for transmitting the insider list to the competent authority were initially meant to be the same (electronic and machine readable form using secure electronic means).
However, further to the public consultation, ESMA changed its mind and proposed to have a "lighter" regime for SME issuers both on the content of the list and on the means for transmission. Therefore a specific template for SME issuers has been added in Annex II to the Commission Implementing Regulation 2016/347 of 10 March 2016.
This new template has been designed with a reduced content. The items:
(a) Personal full address and
(b) Personal telephone numbers
should be included in the insider list only if the information is available to the SME issuer at the time of request of the insider list by the competent authority.
ESMA explained that when the SME issuer is requested by a competent authority to provide an insider list in accordance with the template set out in the Commission Implementing Regulation 2016/347 of 10 March 2016, these two fields shall be populated if the information is available to the SME issuer at the time of the request and without resulting in the issuer informing the insiders about the competent authority's request (tipping-off) to collect the information.
With regard to the format for transmission of the insider list, the approach is to offer flexibility to the SME issuers by not prescribing the use of the electronic means published in the website of the competent authority, but just requiring the use of a format that ensures that the completeness, integrity and confidentiality of the information are maintained during the transmission.
Retention period
The insider list is required to be retained for a period of at least five years after it is drawn up or updated.
Compliance problems
FCA Market Watch No. 60 (Newsletter on market conduct and transaction reporting issues) reviewed in August 2019 the systems and controls used by a sample of investment banks, legal advisers and other consultancies to manage access to inside information.
Findings from the review are as follows:
- Instances of large numbers of support staff having access to documents containing inside information. One insider list suggested that only 12 deal team members worked on the transaction, but that over 600 members of Compliance, Risk and other support functions also had full access to inside information about the deal. Similarly, some insiders at some firms are being classified as ‘permanent insiders’ and have routine access to all inside information without obvious reason.
- Failures to restrict access to inside information to those who need it for the proper fulfilment of their role. For example, support staff having the same access rights to inside information as the deal team, regardless of the differing needs of those roles. However, some firms took reasonable steps, such as granting IT staff access only to anonymised or code-named folders for maintenance or permission purposes, (so not to files within those folders).
- An absence of regular reviews of access rights. This resulted in access not being terminated after staff changed roles or transferred from projects.
- Insider lists containing very generic descriptions of the functions of non-deal team staff, for example ‘Support Function’, or ‘Other Support Function’. FCA questions whether non-descriptive titles provide enough information for firms to track and control how inside information is communicated, and whether a valid business ‘need to know’ is being imposed. Firms should consider whether such descriptions meet the MAR requirement that insider lists should include ‘the reason for including that person in the insider list’ (Article 18 (3) (b)).
- Insider lists including individuals who did not have access to inside information, rendering them not fit for purpose.
- Electronic files containing deal specific inside information stored in general team folders, accessible by (and in some cases, accessed by) front-office staff not working on the deal and not on the insider list.
- Non-deal team staff in multiple jurisdictions having access to inside information, where some of those jurisdictions had no connection to the transaction.
MAR Article 18
Insider lists
1. Issuers or any person acting on their behalf or on their account, shall:
(a) draw up a list of all persons who have access to inside information and who are working for them under a contract of employment, or otherwise performing tasks through which they have access to inside information, such as advisers, accountants or credit rating agencies (insider list);
(b) promptly update the insider list; and
(c) provide the insider list to the competent authority as soon as possible upon its request.
2. Issuers or any person acting on their behalf or on their account, shall take all reasonable steps to ensure that any person on the insider list acknowledges in writing the legal and regulatory duties entailed and is aware of the sanctions applicable to insider dealing and unlawful disclosure of inside information.
Where another person acting on behalf or on the account of the issuer assumes the task of drawing up and updating the insider list, the issuer remains fully responsible for complying with this Article.
The issuer shall always retain a right of access to the insider list.
3. The insider list shall include at least:
(a) the identity of any person having access to inside information;
(b) the reason for including that person in the insider list;
(c) the date and time at which that person obtained access to inside information; and
(d) the date on which the insider list was drawn up.
4. Issuers or any person acting on their behalf or on their account shall update the insider list promptly, including the date of the update, in the following circumstances:
(a) where there is a change in the reason for including a person already on the insider list;
(b) where there is a new person who has access to inside information and needs, therefore, to be added to the insider list; and
(c) where a person ceases to have access to inside information.
Each update shall specify the date and time when the change triggering the update occurred.
5. Issuers or any person acting on their behalf or on their account shall retain the insider list for a period of at least five years after it is drawn up or updated.
6. Issuers whose financial instruments are admitted to trading on an SME growth market shall be exempt from drawing up an insider list, provided that the following conditions are met:
(a) the issuer takes all reasonable steps to ensure that any person with access to inside information acknowledges the legal and regulatory duties entailed and is aware of the sanctions applicable to insider dealing and unlawful disclosure of inside information; and
(b) the issuer is able to provide the competent authority, upon request, with an insider list.
7. This Article shall apply to issuers who have requested or approved admission of their financial instruments to trading on a regulated market in a Member State or, in the case of an instrument only traded on an MTF or an OTF, have approved trading of their financial instruments on an MTF or an OTF or have requested admission to trading of their financial instruments on an MTF in a Member State.
8. Paragraphs 1 to 5 of this Article shall also apply to:
(a) emission allowance market participants in relation to inside information concerning emission allowances that arises in relation to the physical operations of that emission allowance market participant;
(b) any auction platform, auctioneer and auction monitor in relation to auctions of emission allowances or other auctioned products based thereon that are held pursuant to Regulation (EU) No 1031/2010.
9. In order to ensure uniform conditions of application of this Article, ESMA shall develop draft implementing technical standards to determine the precise format of insider lists and the format for updating insider lists referred to in this Article.
ESMA shall submit those draft implementing technical standards to the Commission by 3 July 2016.
Power is conferred on the Commission to adopt the implementing technical standards referred to in the first subparagraph in accordance with Article 15 of Regulation (EU) No 1095/2010.
Questions and Answers On the Market Abuse Regulation (MAR), ESMA70-145-111, updated: 1 September 2017
When does the issuer remain fully responsible under the second subparagraph of Article 18(2) of MAR for the compliance with the insider list requirements by persons acting on behalf or account of the issuer?
The issuer remains fully responsible under the second subparagraph of Article 18(2) of MAR only where a service provider "assumes the task of drawing up and updating the insider list” of the issuer, on the basis of a specific delegation to that purpose.
The issuer is not responsible for the fulfilment of the insider list requirements of the persons acting on its behalf or account mentioned in Article 18(1) of MAR and first subparagraph of Article 18(2) (e.g. advisors and consultants) who are personally responsible for the obligation to draw up, update and provide to the NCA upon request their own insider list.
Where the person that "assumes the task of drawing up and updating the insider list” of the issuer under the second subparagraph of Article 18(2) of MAR is also a person acting on behalf or account of the issuer under Article 18(1) of MAR (e.g. advisors and consultants), that person will be responsible for the obligation to draw up, update and provide to the NCA upon request its own insider list. The issuer will remain responsible for complying with the insider list requirements in relation to its own insider list, the drawing up and updating of which has been delegated to the same person as part of a separate agreement.
Are persons acting on behalf or account of the issuer (e.g. advisors and consultants) subject to the obligation to draw up, update and provide to the NCA upon request their own insider list under Article 18(1) of MAR?
Yes, the legislative aim of the insider list regime under MAR is to cover any person that, by virtue of its action on behalf or account of the issuer, has access to inside information.
Therefore, not only the issuer but also all the persons acting on behalf or account of the issuer that have access to inside information relating to the issuer (e.g. advisors and consultants) are subject to the obligation to draw up, update and provide to the NCA upon request their respective insider list under Article 18 of MAR?
Regulatory chronicle
14 July 2022
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Questions and Answers On the Market Abuse Regulation (MAR), ESMA70-145-111
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