The obligation to notify transactions under the MAR

Act No 60/2021 on measures against market abuse entered into force on the 1 September 2021 and implemented provisions from the EU Market Abuse Regulation (MAR) into Icelandic law.

Author: Ólafur Arinbjörn Sigurðsson

Certain Iceland specific legal provisions which have been in force since 2003 were abolished when MAR came into force, as an example before to the implementation insiders according to the previous Act on Securities Transactions classified into three catagories; primary insiders, temporary insiders, and other insiders. According to the previous Act primary insiders were subject to a the so-called investigation obligation, i.e. primary insiders were obligated to obtain authorization from person appointed as the relevant issuers compliance officer before carrying out a transaction in order to assure that no inside information was in existence within the relevant issuer. This was done for the purpose of promoting credibility in market transactions. Furthermore, this obligation to investigate had to be carried out on the same day as the transaction was expected to occur. Then Primary insiders were subsequently required to report to the relevant issuers compliance officer, in case a transaction took place, details of the transaction in order to allow the compliance officer to notify the transaction to the Financial Supervisory Auhority of the Central Bank of Iceland and also in case of the primary insiders being considered managers there was an obligation on the issuer to make details of the transactions publicly available. It is worth mentioning that Act No 60/2021 which implements MAR contains provisions which obligates Icelandic issuers to have appointed, by the board of directors, a compliance officer which is responsible for ensuring MAR compliance within the issuer and to be main contact towards the Financial Supervisory Authority.

Within MAR are no provisions addressing primary insider transactions. Instead, MAR contains provisions that stipulate the obligation to notify certain transactions conducted by persons discharging managerial responsibilities at listed companies or entities closely associated with them. Individuals who are always viewed as persons discharging managerial responsibilities are members of the board of directors, the managing director. Furthermore, this includes other persons discharging managerial responsibilities with regular access to inside information and the power to take managerial decisions affecting the respective issuers future developments and business prospects. Persons closely associated with individuals holding discharging managerial responsibilities refer to spouses, dependent children, relatives who share the same household as him, as well as legal persons subject to his control or other closely associated persons.

On the one hand, the applicable rules for persons holding management positions in a transaction are that they inherently are unauthorized to trade if they have inside information, and they are generally not allowed to trade during the 30 calendar days before the announcement of an interim financial report or a year-end report on the other hand. Individuals with managerial responsibilities are obliged to report their transactions to the Financial Supervisory Authority and the relevant issuer. The individual in question must send the notification by registering with an electronic ID on the Supervisory Authority’s service website and filling out the appropriate form. The notification must be sent without delay following a transaction but within three business days. The concerned company must publish such notification publicly following the receipt. As stated above, it is clear that MAR introduces considerable changes in terms of the management’s transactions, particularly given that they do not have to request authorization/investigate before they undertake a transaction and, in addition, have additional time to inform about such transactions than according to the previous rules.

Concerning the abovementioned, it is worth mentioning that with MAR, the obligation to maintain insider lists is changed. Indeed, there are provisions in MAR regarding insider lists. However, according to them, such lists should solely be prepared in the circumstances where insider information exists, i.e., information of a precise nature, which has not been made public, relating, directly or indirectly, to one or more issuers or to one or more financial instruments, and which, if it were made public, would be likely to have a significant effect on the prices of those financial instruments. Thus, if persons discharging managerial responsibilities or others have received a notice from a issuers compliance officer that their names are on an insider list, it automatically indicates that those individuals are not permitted to trade while such an insider list exists. The insider lists in question expire as soon as the information concerning them is made public or the information is otherwise no longer considered insider information.

A new provision in MAR obligates persons discharging managerial responsibilities to notify the pledging or lending of financial instruments. For that reason, this provision requires notification where the manager pledges the securities as collateral to gain credit.

Lastly, it is worth noting the changes resulting from the MAR entering into force and concern the notification obligation with shares in listed companies, i.e., issuers transactions with their own shares. According to the previous Act on Securities Transactions and established rules, a company’s transactions with its own shares were subject to notification in the same way as for primary insiders’ transactions. In MAR, there are no provisions regarding the company’s transactions with its own shares other than transactions according to buy-back programs. For such transactions, information on buy-back programs shall be publicly announced before such programs. Transactions according to buy back programs must be reported to the Financial Supervisory Authority as well as being publicly disclosed. Adequate limits regard to price and volume must be complied with. In addition, the transactions shall be carried out for a specific purpose, i.e., to reduce the share capital, meet obligations arising from convertible debt financial instruments, or meet obligations arising from share option programs.

Other transactions of the issuer, e.g., when the issuer delivers shares to employees who exercise the share option programs, are not subject to notification obligation according to MAR. Therefore, there is a relatively significant change in the implementation of the financial market from what has been customary in this country.

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