As we’ve reported previously, the Market Abuse Regulation (MAR) came into force in the UK on 3 July 2016 (see Get ready for the new market abuse regime). One of the key consequences of MAR’s implementation was that the standard share dealing code, the Model Code, was deleted from the FSA’s Listing Rules as it was not compliant with MAR. At the same time, the AIM Rules were amended to require companies traded on AIM to have an effective policy to regulate dealings by their senior executives.
The FSA had indicated that it would not be replacing the Model Code leaving public companies in the dark about what investors would expect their share dealing code to say. Helpfully, the Institute of Chartered Secretaries and Administrators (ICSA), together with the GC100 and the Quoted Companies Alliance, have stepped into the breach and published a specimen share dealing code and related documents.
The specimen dealing code
The document produced by ICSA is divided into two parts:
- General clearance procedures: the first part of the code contains general clearance procedures which can apply not only to the company’s ‘persons discharging managerial responsibilities’ (PDMRs) but also to any other employees to whom the company wants the clearance procedures to apply. MAR and the AIM rules only require the code to apply to PDMRs but some companies prefer a wider category of employees to be subject to formal clearance procedures. This part of the code sets out the formal process for requesting clearance to deal and the circumstances in which clearance should not be requested or may be refused, for example, where the employee is in possession of inside information (see Insider dealing doesn’t add up: £3k profit = £36k fine for a salutary lesson in the dangers of dealing when in possession of inside information); and
- Additional provisions for PDMRs: the second part of the code sets out the additional requirements which apply under MAR when a PDMR wishes to deal in shares or other securities. This includes the prohibition on dealing during a closed period and the requirements to notify both the company and the FCA when a dealing has taken place. The code also requires PDMRs to give the company details of ‘persons closely associated’ with them so the company can fulfil its obligation to keep a list of its PDMRs and their PCAs.
As well as the specimen dealing code, ICSA has also published:
- a specimen dealing policy designed to be sent to all employees to introduce them to the concept of market abuse and explain the offences of insider dealing and unlawful disclosure of inside information; and
- a specimen dealing procedures manual which could be used by the company secretary or other person responsible for the management and implementation of the company’s procedures for regulating dealings by its PDMRs and other employees. The manual includes guidance on general dealing requirements and clearance procedures, as well as notices for changes to the company’s insider lists.
A note of caution
The publication of these specimen documents will undoubtedly be welcomed by companies struggling to get to grips with the practical consequences of the changes imposed on them by MAR. However, the wholesale adoption of ICSA’s specimen dealing code, without any changes, may not satisfy the relevant regulatory requirements. The London Stock Exchange has stated that companies should avoid adopting a boilerplate template which is not tailored to the company’s circumstances. Instead, a share dealing code should be designed in a meaningful way, taking into account the needs of the particular company. That company will then need to ensure that any such code is understood and applied effectively in practice.