Restrictions on Share Dealings by PDMRs – Closed Period – Art 19 MAR

Question 1

Exam tip - Consider 4Ws when handling PDMR/ PCA

Answer 1

i) Who (name)
ii) To whom (co.)
iii) Why (PDMR); and
iv) By when (Art. 19(1)/(3))

Question 2

1. What is the prohibition?

Answer 2

1. Art. 19(11) MAR: PDMRs must not conduct any transaction, either for his/her own account or for the account of a third party

Question 3

2. Is the person a PDMR?

Answer 3

i) PDMR: Art. 3(1)(25) MAR); or
• a member of the administrative, management or supervisory body of the issuer (i.e. for a UK company, a director); or
• a senior executive who is not a member of such bodies, who has (i) regular access to inside information relating directly or indirectly to the issuer, and (ii) power to take managerial decisions affecting the future developments and business prospects of the issuer.
• NOTE: if in exam you’re asked whether e.g. a company which the PDMR owns a majority of voting rights, can deal during closed period, remember that Art. 19(11) MAR only restricts dealings for PDMRs, and NOT PCAs, therefore the co would be free to deal even if the PDMR is not.
Remember, though, Art. 19(5) MAR requires each PDMR to notify their PCAs of their obligations under Art. 19 MAR in writing, and to keep a copy of the notification. As Arts. 19(1) and (2) do apply to a PCA, the PDMR would need to make sure that they have complied with this provision. Should also check internal codes on dealing and make sure not as a result of insider info.

Question 4

3. Determine Breach: Art. 19(11) MAR - PDMR dealing during ‘closed period’.

Answer 4

• Closed period =
i) 30 calendar days before interim financial report announced
ii) 30 calendar days before full year results published
Which the issuer is obliged to make public according to regulations of trading venue/national law
• DTR 4.2.2R, interim result are required to be published within 3m of the end of the first 6m of an issuer’s financial year, so clearly fall within the provisions of Art 19(11) MAR.
• ESMA MAR Q&As confirm that preliminary financial report also caught, as long as it contains all the key information to be included in the final report.

Question 5

4. Exceptions?

Answer 5

i) Art. 19(12) MAR: may be allowed to trade during closed period, on a case-by-case basis, due to exceptional circumstances e.g. PDMR’s severe financial difficulties which require immediate sale of shares or for certin narrowly defined categories.
ii) Commission Delegated Regulation 2016/522
Art. 7(1) – requires one of the circumstances in Art 19(12) MAR to be met, and also for the PDMR to demonstrate that the transaction cannot be executed outside the closed period.
Art 8(2): circumstances relied upon must be urgent, compelling, unforeseen
Art. 7(2) – must provided a reasoned written request to issuer for permission to deal
- ALSO IN EXAM CONSIDER – EVEN IF FREE TO DEAL I.E. IT IS NOT CLOSED PERIOD, MAY BE PREVENTED AS WOULD AMOUNT TO INSIDER DEALING UNDER Art. 8(1) and Art. 14(a) MAR (SEE SGS 7)

Question 6

5. Consequences

Answer 6

s. 123 FSMA: any person who has contravened, or been knowingly concerned in the contravention of, Art. 19(11) MAR may be fined or censured by the FCA.

Question 7

Exam tip - practical advice

Answer 7

EXAM TIP: REMEMBER TO ALWAYS GIVE PRACTICAL ADVICE AT THE END E.G. THE PDMR SHOULD WAIT UNTIL AFTER THE RESULTS HAVE BEEN ANNOUNCED BEFORE SELLING THEIR SHARES.