‘A compliance officer will go to jail in 2016’

This article is sponsored by EQS

‘A compliance officer will go to jail in 2016.’ This was the title of a recent article about new capital markets regulations by Nigel Farmer, a director at German digital business platform provider Software, published on LinkedIn.

While we hope that won’t happen, there is no doubt the new requirements under the Market Abuse Regulation (MAR), which comes into force on July 3, bring on new challenges. Among the key MAR obligations are new requirements relating to insider lists. For companies listed on multilateral trading facilities (MTFs) such as the AIM, insider lists are a completely new obligation. For issuers listed on regulated markets, the new rules present major changes to former requirements.

For every insider project, a list must be kept of all people having access to insider information. It is no longer possible to simply name someone as a temporary insider for a defined time period without adding that person to all insider projects he or she is aware of.

While it would obviously be easy to label someone as a permanent insider, there are doubts that in practice it will be possible to classify many people as such ‒ with the possible exception of those in charge of the insider list. Indeed, the European Securities and Markets Authority (ESMA) states that ‘inclusion in the permanent insiders section implies that the insiders have access to all inside information at all times.’But how many people in an organization actually fall into that category? For example, even CEOs are not always aware of insider-relevant HR discussions by the supervisory board.

Issuers must also include extended personal information about their insiders, such as private phone numbers and national ID numbers, where applicable. The exact time the insider information was identified and the time the person became aware of that specific information must also be recorded.

Time must be stated in Coordinated Universal Time, which means international corporations not only have to consider changes due to daylight saving time, but also different time zones. If national authorities have previously sent few requests for insider lists, this does not mean efforts or vigilance can be minimized. ESMA underlines that‘the lists should be kept up to date at all times and not only upon receipt of a request from a competent authority.’

As an issuer you also have to ensure every person you include on the list acknowledges the legal and regulatory duties of being an insider and is aware of potential sanctions. For companies of a certain size, it will be difficult to manage the complete workflow around insider lists without a professional solution. Relying on Excel is not the best answer, especially given that a list needs to be stored for five years after each update. MTF-listed firms should set up a professional system and process from the start. For issuers on a regulated market, MAR is a good opportunity to review and improve current processes, and will also allow them to save a lot of time and money in the future.

The EQS INSIDER MANAGER is an internet-based solution stored in a secured private cloud that allows an integrated workflow. You can not only maintain your insider lists and insider projects, but also automatically inform your insiders with personalized mailings and documents that they simply acknowledge online. A record of every action you take will automatically be available in the system, which offers a sophisticated sort-and-search function and allows the import and export of Excel files. You can also hand responsibilities over to different departments or colleagues overseas, as the system is available 24/7 and can be accessed from anywhere.

Using the EQS INSIDER MANAGER is more fun than going to jail.