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Final Implementation for MAR

4th May 2016

FCA publishes Implementation for MAR

Last week the Financial Conduct Authority published a Final Policy Statement (PS 16/3) on the Implementation of the Market Abuse Regulation.

The Policy Statement sets out the final policy proposals and changes to the FCA Handbook and guidance in preparedness for when the EU’s new Market Abuse Regulation takes effect this summer. Feedback on the main issues from the FCA’s November consultation papers CP15/35  (on the implementation of MAR ), and CP15/38 (on provisions to delay disclosure of inside information within the FCA’s Disclosure and Transparency Rules (DTR))was also provided and incorporated into the FCA Handbook changes required to implement MAR.

With MAR set to take effect from 3 July 2016, these final FCA Handbook provisions and guidance will also come into force from that date.

What was not included?

It should be noted that whilst this most recent FCA Policy Statement PS16/13 covers the implementation of MAR and the affect it will have on the FCA Handbook, it does not cover the changes to the Decision Procedure and Penalties Manual (DEPP) and the Enforcement Guide (EG).

Instead, these provisions are being consulted upon under a separate paper published by the FCA on 22 April 2016 (CP16/13). Comments on the changes to the Decision Procedure and Penalties Manual and the Enforcement Guide should be sent to the FCA by 22 May 2016.

Policy Statement: Implementation of MAR:

As previously noted, MAR will be directly applicable to firms across the EU rather than through National legislation, thus resulting in a number of changes to the existing Handbook – the main discussion point of the FCA’s consultation.

From PS16/3, the FCA Handbook sourcebooks that are most affected by the implementation of MAR can be summarised as:

• MAR 1: Code of Market Conduct (CoMC)

The FCA is maintaining their approach to remove Handbook provisions that overlap with the provisions in the EU’s MAR. In addition, where it is possible the regulator will signpost readers to equivalent EU MAR provisions.

• COBS 12.4: Research Recommendations

The FCA advise that they maintain their proposed amendment to the definition of ‘non-independent research’ as it will conform the existing terminology used in COBS 12.4 to MAR terminology. The FCA further clarify that “Irrespective of this change, provided that short term sales notes objectively fall under the definition of an investment recommendation and do not constitute investment research, these have always been classified as non-independent research.”

• SUP 15.10: Reporting Suspicious Transactions
• DTR: Disclosure Rules & Transparency Rules

This section will be altered so that Disclosure Rules & Transparency Rules become to Disclosure Requirements and Transparency Rules. The main sections in DTR affected by MAR are:

• DTR 1 - Disclosure Rules & Transparency Rules;
• DTR 2 - Modifying rules and consulting the FCA; and
• DTR 3 - Transactions by persons discharging managerial responsibilities and their connected persons

• Annex 1 of LR9 (Model Code): Listing Rules Chapter 9 and Annex 1

In relation to the Model Code in Annex 1 of the Listing Rules Chapter 9, the FCA advises that this is no longer compatible with EU MAR as there is clear overlap between the two. Thus, the retention of the Model Code in Annex1 LR9 in its current form is incompatible with the European legal obligations. As such, the FCA will be removing the Model Code and not introduce any additional proposed new rules or associated guidance as they had previously suggested they might.

Where sections of the FCA handbook are being removed or altered for conflict with MAR, the regulator will provide signposts to firms to enable them to refer to the relevant section in the EU Regulation.

However, many of the respondents to the FCA’s consultation had asked why the regulator was not copying sections of the MAR text into its Handbook to make finding the rules easier for market participants. In response, the regulator has deemed signposting text to be sufficient and an important measure to help ensure that the EU rules are not taken out of context or mis-interpreted.

In addition, the FCA has advised it is unable to provide direct hyperlinks to the relevant sections of the EU MAR text due to “technological constraints”, though is hoping this may change in time.

MAR Regulation Next Steps:

It should be noted, however, that whilst the FCA has now issued their Policy Statement and the final Handbook amendments for MAR Implementation, the regulator has advised that it is “still unclear when all the final Level 2 texts of the [Market Abuse] Regulation will be published in the Official Journal of the European Union”. As such, there could be potential changes should there be any objection by the European Parliament and Council.

The FCA have advised they will monitor for any changes related to EU MAR legislation and European Guidelines that are made during the process, and will advise upon and make any subsequent amendments to the FCA Handbook as necessary.

MAR Implementation Support & Assistance:

If your firm is in the midst of preparing for the new Market Abuse Regulation and would like to discuss how MAR may affect your business and what you may need to do to finalise your MAR preparations, please contact our regulatory and compliance specialists who would be happy to help.

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