Directors' know how is a monthly article, which highlights key rule changes, proposed changes and market updates so that you know what is coming down the track.
The Market Abuse Regulation is here
Your company needs to be ready to comply with the Market Abuse Regulation (MAR), which comes into force on 3 July 2016. MAR establishes a new, common regulatory framework on market abuse covering insider dealing, unlawful disclosure of inside information and market manipulation, as well as measures to prevent market abuse.
There have been a number of recent updates ahead of its entry into force:
- MAR Dealing code and policy document – We have collaborated with ICSA: The Governance Institute, GC100 and other market participants to develop a single, industry-led dealing code that is compatible with MAR. Companies will be able to use the provided specimen group-wide dealing code, specimen dealing code and specimen dealing procedures manual as a basis upon which to comply with MAR and the AIM Rules.
- AIM Notices 44 and 45 – In advance of MAR coming into force, AIM Regulation published a consultation document with AIM Notice 44 on changes to AIM Rules for Companies regarding disclosure of price sensitive information, directors’ dealings and restrictions on dealings. In our response to the consultation, we noted our concern that AIM companies could be in a conflicted position due to the similarities of scope of Rule 11 (General disclosure of price sensitive information) and Article 17 of MAR. Following the consultation, AIM Regulation concluded that the rule changes proposed in AIM Notice 44 will be implemented in full (save for certain consequential changes relating to the definition of applicable employee and guidance to rule 21). Companies must be ready to comply with the revised AIM Rules for Companies from 3 July 2016.
- ISDX proposed changes to the Growth Market Rules for Issuers and Corporate Adviser Handbook: In advance of MAR coming to effect, ISDX proposed to retain Rule 32 regarding the disclosure of price sensitive information and delete the asymmetrical closed period requirements under the ISDX Rules so that issuers will be subject only to the MAR close period obligations from 3 July 2016. In our response, we argued that we were concerned that a company complying with MAR does not necessarily indicate its compliance with Rule 32.
FRC publishes FAQs on ESMA Guidelines on Alternative Performance Measures
The FRC has responded to some frequently asked questions on the application of ESMA’s Guidelines on Alternative Performance Measures (APM), which were issued in October 2015.
The FRC clarified that, from 3 July 2016, the Guidelines will apply to companies with listed shares or debt when presenting APMs outside the financial statements in Annual Reports, Half-yearly reports or preliminary announcements. They are also to be applied in other ad-hoc communications, such as RNS announcements and press releases, which are subject to the Transparency Directive or the Market Abuse Regulation and in the preparation of prospectuses. When APMs are presented in an Annual Report, compliance with the Guidelines will help ensure that, taken as a whole, so that it is fair, balanced, and understandable.
Financial Reporting Lab Project – Digital Future: Data
The FRC’s Financial Reporting Lab has issued a call for participants in its new project – Digital Future: Data.
Discussed at one of the breakout sessions at the QCA’s Annual Conference, the project will examine:
- How technology trends might drive future change in corporate reporting and provide opportunities for improvements in the access to, and analysis of, corporate reporting data; and
- How transformation of reporting formats, potentially driven by regulatory change (such as the expected implementation of a European Single Electronic Format for corporate reporting by 2020), might be optimised for investors and companies.
The project will begin this year, with the publication of initial outputs out by the end of 2016.
If you have an interest in participating in the project, please email FinancialReportingLab@frc.org.uk, or telephone Thomas Toomse-Smith (020 7492 2458) or Sue Harding (020 7492 2442) by 20 July 2016.