BY: ComplyLog|July 4, 2022|Insider list management
Organisations around the European Union are increasingly aware of the need to strengthen their internal policies to ensure compliance with a range of new and updated directives and pieces of legislation, including the Market Abuse Regulation (MAR). One way you can reduce your compliance risk is to develop a specific market abuse policy.
When you publish your compliance efforts in an official company document, you ensure that everyone understands what is expected of them. Your market abuse policy can prevent the organisation from facing sanctions or criminal proceedings.
Here are some examples of recent market abuse fines handed out around Europe:
This article explores why you need a market abuse policy and how to build one that will help your compliance efforts.
Table of Contents
III) Why do you need a market abuse policy?
IV) How to create a market abuse policy
The Market Abuse Regulation was introduced in 2016 to protect investors, increase transparency in the financial markets and prevent market abuse.
MAR includes provisions covering the following elements of market abuse:
|Insider dealing||The act of using inside information, which is non-public, specific and likely to affect the price of a financial instrument if it were to be made public, to execute deals to one’s own benefit.|
|Unlawful disclosure of inside information||Distributing inside information in any situation other than in the course of regular professional duties.|
|Market manipulation||Purposely giving misleading signals regarding the supply and demand of a financial instrument or its potential price.|
|Market soundings||Guidance relating to the act of communicating information before a transaction is announced.|
|Persons discharging managerial responsibilities||PDMRs are required to notify relevant authorities of any order or transaction undertaken on their personal accounts that relate to the issuer, as well as adhering to closed periods in trading.|
A market abuse policy is a document created by an organisation to set out procedures for adhering to MAR.
It will include information on the legal responsibilities and roles relating to market abuse, recording and reporting requirements, and definitions of the key elements within the regulation, such as inside information.
The company should set out clear procedures for any activity connected to market abuse, such as creating and maintaining insider lists.
By implementing a market abuse policy, you send a strong message to your employees that you are committed to preventing market abuse from occurring in your workplace. By taking a stance against manipulating the markets, you send a clear message that the company culture embraces integrity and ethical behaviour.
This means that your employees will prioritise related matters when performing their duties, which helps with your compliance efforts.
Your market abuse policy can also provide a marketing opportunity because it shows your clients that you are committed to protecting them from market abuse.
Understanding the legislation and integrating that into how you work are two different challenges. The solution is to provide a common set of standards, rules and procedures in your policy that all employees will perform to remain compliant.
For example, a PDMR might understand that they need to report their transactions. By providing a straightforward, standardised procedure on how they are expected to complete their notifications, you ensure they meet all the requirements and do not miss anything out.
A set of rules on tackling market abuse provides transparency over your compliance efforts. You set out how you expect employees to behave and how you will ensure that they do so. The more public this information is, the easier it is to make compliance a natural part of the company culture.
With online compliance systems such as InsiderLog, your procedures for building and maintaining insider lists are transparent and open, allowing anyone to understand what they need to do and how to adhere to your policy.
Not only does a clear and robust market abuse policy reduce the chances of illegal activity occurring, but it can also safeguard the organisation to some degree if something happens.
When deciding on sanctions for infringements of MAR, the national competent authority could be more lenient with companies that can prove they put systems and processes in place to prevent market abuse. Your market abuse policy could constitute this evidence in the case of an investigation.
Consider what your priorities are for the policy. Ideally, it should provide an overview of the law, your systems and procedures for adhering to it, and the sanctions associated with the policy. This would include both the sanctions imposed by the NCA on the firm and individuals and also the measures that the company will take internally in case of an infraction.
You might also want to add instructions on using the monitoring and compliance tools you employ. Whatever is most important to your organisation, you should note it down and cover it in adequate depth.
Once you have developed your list of priorities, you need to transpose them into a finished policy that you should publish and distribute. It can sit on your website to show publicly how you help maintain market integrity. It can also appear on your staff intranet, where employees can access it to ensure they remain compliant.
As with any other time that you implement new policies, you must organise training for all staff on what the market abuse policy means and how to adhere to it. You should ensure that everyone has read the policy and understood the ramifications of failing to follow it.
Training should cover all aspects of the policy, from understanding MAR and thinking about how it applies within your organisation to the procedures for monitoring and reporting non-compliant behaviour.
For compliance and monitoring staff, there should be specialist training, too. They need more than a general understanding of your market abuse policy. They also need to understand how you intend to monitor employee behaviour and activity as well as how to investigate reports of market abuse offences.
Training in how to create insider lists, for example, and how to keep them up-to-date is essential for adhering to MAR.
MAR features several reporting and monitoring requirements for businesses, which can create a great deal of administrative work to maintain compliance.
InsiderLog streamlines and automates the process of dealing with insider lists to take away a large proportion of the manual work whilst keeping the company compliant with MAR. You can create and maintain insider lists on this online platform and then automatically fulfil your responsibilities to inform insiders of their inclusion. The system sends them notifications and has them confirm that they understand what is required of them. It will send reminders until they respond. It also tracks the changes to your insider lists, a requirement under MAR, and stores your list of PDMRs and closely associated persons (CPA).
NCAs can prosecute both companies and individuals – legal and natural persons – for breaches of MAR.
MAR applies to any person or entity participating in market trading, in regards to the following financial instruments:
Insider dealing, also known as insider trading, is defined in MAR as follows:
“Insider dealing arises where a person possesses inside information and uses that information by acquiring or disposing of, for its own account or for the account of a third party, directly or indirectly, financial instruments to which that information relates. The use of inside information by cancelling or amending an order concerning a financial instrument to which the information relates where the order was placed before the person concerned possessed the inside information, shall also be considered to be insider dealing.”
A market abuse policy helps you drive MAR compliance throughout your organisation. It enables all key stakeholders to understand the legal requirements, their personal obligations, the systems they should follow and the sanctions for falling short of the policy. It also acts as a sign of your commitment to the law and allows your clients peace of mind.
To make your compliance efforts run smoothly, try InsiderLog. The platform automates the process of informing insiders of their place on the insider list, which is a crucial requirement of MAR. InsiderLog helps you demonstrate to your NCA that you have made all efforts possible to remain compliant. InsiderLog is a single platform to manage all of your insider lists and keep the records you are required to keep. Request a free demo today.