BY: ComplyLog|October 7, 2021|Insider list management
The EU Whistleblowing Directive has to be transposed in national law by 17th December 2021. Organisations employing 250 staff members or more, as well as municipalities serving more than 10,000 citizens, have to implement internal whistleblowing reporting systems by that date.
Implementing the system itself can be difficult but, when you add the fact that you also have to be mindful of GDPR, it becomes a true challenge. One of the biggest concerns to organisations is how they will protect all of the data they will collect and stay compliant with the data privacy regulations within the union.
GDPR and whistleblowing go hand-in-hand. This article is here to help data protection officers and compliance teams do what they can do to prepare.
We will go over the basics behind the General Data Protection Regulation (GDPR), the scope of the Whistleblowing Directive, the main data protection issues and the elements you need to instigate as part of your compliance strategy.
Table of Contents
Procedures related to market soundings
Disclosing market participant process
According to MAR, a market sounding is the process of an issuer, secondary offeror of a financial instrument or a third party, such as an advisor, acting on their behalf communicating with investors and sharing information about a possible transaction and its conditions. The goal of a market sounding is to gauge interest in the transaction and to help determine the size and price of the instrument.
It could be for an initial public offering (IPO), a secondary offering or ahead of a merger and acquisition (M&A) transaction. Particularly in the case of the latter, there is often the need to disclose inside information during a market sounding, which is accounted for in MAR.
In every market sounding, there is a disclosing market participant (DMP) and a person receiving the market sounding (MSR):
|DMP||The DMP is the issuer or their advisor. They are the party making the disclosure in order to test the market ahead of the transaction.|
|MSR||The MSR is the party who receives the market sounding and is asked for their reaction and interest in the transaction.|
There are a number of compliance obligations DMPs should take before they conduct a market sounding:
An MSR should carry out the following procedures before and upon receiving market soundings:
You should consult MAR to decide whether the market sounding regime applies. The regulation lists four main criteria for making that decision. A market sounding is:
However, a market sounding also needs to be in-scope for MAR, which is dictated in Article 2. It is stated that the regulation, and, therefore, the market sounding regime, applies to:
If the action you are taking relates to one of the in-scope financial instruments and fits the definition of a market sounding, you must undertake the obligations of the regime.
Communications made after the announcement of the transaction are not counted as market soundings. However, MAR does not define what form the announcement should take, so it is up to the DMP to determine whether the announcement it makes about the transaction is substantive enough to mean that further communications no longer count as market soundings.
Once the DMP has considered whether the information it will disclose counts as inside information, it must proceed in one of two ways.
For cases where an issuer or advisor will disclose inside information during a market sounding, they must:
Even when a DMP determines that a market sounding does not contain inside information, there is still a set procedure to go through. They must:
There are also a number of record-keeping requirements for DMPs. They must note:
The DMP should keep these records for five years in a durable medium that can be easily read.
In addition, the DMP must keep an insider list of those individuals in possession of inside information, as is required by MAR.
The market sounding recipient should keep the following records:
The MSR should keep these records for at least five years.
Generally, the DMP doesn’t inform the MSR if the deal does not proceed. When the transaction does not go ahead, informing the MSR that it won’t proceed and giving them a reason can sometimes accidentally lead to further disclosure of inside information.
The market sounding process is complex due to the legislation and paperwork that it involves, but it is important to understand for compliance. Doing things the correct way means that a DMP is covered in terms of the disclosure of inside information. Without that, they can find themselves being hit with substantial penalties.
One of the key requirements of MAR is to keep an insider list when documenting and disclosing inside information, whether that is during a market sounding or for another reason. You can make this time-consuming task easier and ensure you stay compliant with InsiderLog. Request a free demo to learn more.