On 20 March 2023, the European Securities and Markets Authority (ESMA) published a press release, expressing concerns about proposed modifications to the insider list regime contained in MAR in a letter addressed to the European Parliament and the Council of the European Union.

In the letter, ESMA expresses its overall approval of the Listing Act Proposal published on 8 December 2022 by the European Commission, as it aligns with some of the recommendations previously made to the European Commission by ESMA. However, ESMA has raised substantial concerns regarding the amendments proposed to article 18 of MAR, contained in the Listing Act Proposal.

Article 18 of MAR requires issuers and any person acting on their behalf or account to draw up a list of all persons who have access to inside information and who are working for them or otherwise performing tasks that give them access to inside information. Such list must be updated in certain cases. Article 18 also requires that issuers and any person acting on their behalf or on their account, take all reasonable steps to ensure that any person on the insider list acknowledges in writing the legal and regulatory duties entailed and is aware of the sanctions applicable to insider dealing and unlawful disclosure of inside information.

One of the proposed changes is to limit the inclusion of individuals on insider lists to those who have regular access to inside information, excluding those who may only have access on a case-by-case basis. The letter highlights potential adverse effects of these modifications on: (1) the National Competent Authorities’ (NCAs) ability to prevent market abuse; and (2) on issuers who rely on insider lists to regulate the dissemination and access to inside information.

Specifically, ESMA has noted that the proposed changes could have a significantly negative impact on the NCAs by limiting its ability to timeously identify non-permanent insiders. Furthermore, the NCAs will not be able to use the list to determine which permanent insider accessed each piece of inside information and when. ESMA noted that this may all culminate in the identification of insiders being a lengthy and difficult process that the NCAs will have to carry out anew, each time an investigation is launched into a potential insider.

Additionally, the proposed changes may also affect issuers who utilise insider lists to regulate inside information and safeguard themselves, their employees, and third parties. ESMA has warned that the proposed changes would reduce the level of awareness among all insiders, who themselves would no longer receive notifications regarding their possession of inside information or be educated on relevant obligations and prohibitions. As a result, this lack of awareness may increase the risk of unintended insider dealing and may further weaken the issuers’ control over the flow of inside information.

ESMA’s press release can be found here and ESMA’s letter can be found here.