What Is A Confidential List? Does MAR Require One?

The Market Abuse Regulation (MAR) provides a legal procedure for dealing with the potential for insider dealing in the EU through the creation of insider lists. These event-driven lists of individuals are dynamic, meaning that issuers must keep them updated as more people gain access to inside information. However, if you feel that there is a potential for inside information to develop in the future from actions that have taken place within the business, you might consider placing anyone with knowledge of those actions on a confidential list in the interim. 

This article explains what confidential lists are, how they work and what you need to know about drawing them up. You can also find example use cases for these lists. 

1. What is a Confidential List?

A confidential list is also known as a confidential project list, a sensitive list, a grey list or a shadow list. In the workflow of MAR compliance, it forms the step before the insider list and requires that you make the distinction between which information is merely ‘confidential’ and which is ‘inside’. The confidential list features employees, advisors, accountants, credit rating agencies and others who are privy to confidential information that you judge would not affect the company share price if it were to be made public currently, but which may do so in the future.

Taking the step to create a list of these people gives you the opportunity to officially remind them of the confidentiality of the information they possess and advise them to be cautious about sharing that information. It is then important to continue to monitor the situation and act to create an insider list when you identify that the information passes from being confidential to inside information. When this happens, having a confidential list already means you are better prepared for the creation of an insider list. 

2. When Should You Draw Up a Confidential List? 

As confidential lists are not a legal requirement like insider lists, it is down to your own best judgement when to draw up a confidential list. For example, at the beginning of a project that you believe could affect the company share price in the future were it to develop further.

The time to think about a confidential list would usually be at the early stages of a confidential project before too many finer details or systems are in place. Perhaps there have been initial conversations about a development or a deal, but nothing has been fully planned or actioned. In these cases, it is prudent to draw up a list of the people who hold this confidential information and to inform them that discussion of the project should be limited to certain individuals. 

Once you judge the information to have passed the point of simply ‘confidential’, you should produce an insider list that discourages those listed from undertaking insider dealing. 

3. Typical Use Cases for Confidential Lists

3.1 New product

Early plans are being made for a new product that will open up new markets for the business. At this stage, it only exists on paper, but it has great potential and could prove to be a gamechanger. You deem that the disclosure of information in the current state of the project wouldn’t garner much interest. However, once the product moves into the testing stage and comes closer to going to market, it is likely to cause excitement. Placing all parties with knowledge of the plans onto a confidential list prepares the business for creating an effective and comprehensive insider list when the time comes. 

3.2 M&A

The executives at two companies have met to gauge the receptiveness to a potential merger or acquisition. There have been no agreements made and no follow-up from either business yet. In the eyes of the world, this is not yet a story, but it would become one if it developed further. Now is the time to remind anyone who knows about this that the information is confidential and that it is part of their obligations to keep it to themselves.

4. How to Digitise the Process

Digitising the process of creating confidential lists makes it easier to keep track of and provides an audit trail. Using an online solution like InsiderLog allows you to do the following:  

• Document confidential information
  Note the project in question, as well as the date and time you recognised it as confidential information that may affect share price in the future.
• List relevant persons with confidential knowledge
  Input the details of anyone you know to have confidential knowledge of the project.
• Notify list members
  When you add members to the list, InsiderLog sends them an email informing them that they are on the list and asking them to verify their name and position in the company, as well as clicking a confirmation link.
• Convert to an insider list
  If the information crosses the threshold and becomes inside information, you can easily convert the list into an insider list. InsiderLog allows you to transfer all or some of the current members to the new list.

5. FAQs

5.1 Do we have to use confidential lists?

Confidential lists are not a legal requirement. However, they do allow you to make a preemptive attempt to contain information that may affect the share price in the future. These lists act as a precursor to the insider list and can help show that you have attempted to head off any potential issues. They also make the process of compiling the insider list easier and faster, particularly if you use a solution like InsiderLog that allows you to convert your confidential list into an insider list. 

5.2 Can you use confidential lists instead of insider lists?

Confidential lists perform a different function than insider lists, so you cannot supplant one for the other. You can progress from a confidential list to an insider list when you make the decision that the information will affect the share price and that anyone with that information could benefit from insider dealing. 

5.3 Is it possible to never have insider lists, only confidential?

Insider lists are a legal requirement in the European Union under MAR, whereas confidential lists are optional. You can choose to never have confidential lists, only insider lists if you wish, but not the other way round. 

6. Conclusion

Although not a requirement, a confidential list just provides a little more security, helping you place restrictions on disclosing confidential information and building the prototype of your insider list. Preparing a confidential list in advance means you do not have to start from scratch at a particularly business-sensitive time when creating your insider list. You have all the information you need to draw up an insider list which means that you will easily meet MAR’s strict deadlines. All you have to do, when using InsiderLog, is to transfer the list members you need to the new insider list. Request a demo today of InsiderLog and stay compliant with MAR.

7. References and Further Reading

• All About MAR 
• ESMA MAR Guidelines
• How Companies Prepared for MAR
• Insider List Templates
• How MAR Affected Business