Ever since the Market Abuse Regulation ("MAR") came in force, current market practice has been that an issuer is only obliged to create an insider list if the issuer decides to postpone the disclosure of certain insider information. In other words, such an obligation is not deemed to exist if the issuer has publicised the insider information as quickly as possible. This arrangement is not expressly supported by MAR's wording, but there are reasons to support it in the context of the provisions. However, it can be concluded from the correspondence of that Swedish Financial Supervisory Authority (FI) in a closed case that the FI does not share that assessment, and asserts that an issuer is obliged to draw up an insider list even if the insider information is publicised as quickly as possible.
The FI has investigated a Swedish bank for potential violation of MAR. The background to the investigation is that during September 2018 the bank drew up a report in which its group-compliance function identified a number of specific risks concerning suspected money-laundering transactions involving customers of the bank's Baltic subsidiaries.
In a preliminary assessment sent to the bank the FI stated that in accordance with MAR Article 7 insider information arose in conjunction with delivery of the report to the Bank's CEO, and that the bank had breached MAR Article 18 by failing to create an insider list in conjunction with this. The FI's investigation previously also included a potential violation of MAR Article 17, which stipulates that insider information must be publicised as quickly as possible. But the FI chose not to proceed with this aspect of the investigation, because on 5 May 2021 Nasdaq Stockholm’s disciplinary board notified the bank of a penalty of 12 annual charges (equivalent to SEK 46,575,000).
In the preliminary assessment described above, the FI writes that:
"[...] at the time the bank did not seem to have assessed whether those circumstances constituted insider information, and thus had not revealed any insider list pursuant to MAR Article 18.”
This wording suggests that the FI is of the opinion that the obligation to draw up an insider list arises when insider information is identified, rather than in conjunction with a decision to postpone disclosure of insider information pursuant to MAR Article 17.4. The FI's position is a departure from the opinion that has characterised the market's handling of insider information ever since MAR came into force, and would in practice constitute a paradigm shift concerning the issue of when the obligation to set up an insider list arises. However, the FI does not completely lack support for its argumentation. In a report dated 23 September 2020 the European Securities and Markets Authority (ESMA) emphasises that an insider list must be created “promptly”, regardless of any decision to postpone disclosure of insider information.
The bank responded to the FI's preliminary assessment by rejecting the FI's argumentation, stressing firstly that the report did not constitute insider information and secondly that even if the report had contained insider information there were no prerequisites for postponing disclosure of the report, and that the report had therefore been publicised as quickly as possible. The bank argued that in these circumstances there is no obligation to draw up an insider list. Regarding ESMA’s report, the bank emphasised that:
“ESMA’s opinion has not been expressed in any delegated act, technical standard or questions and responses from the ESMA, and the competent authorities in Europe have differing opinions on this matter.”
The bank also asserted that ruling on this case was ultimately a matter for the European Court of Justice.
In most cases insider information should only be publicised a certain time after that information has arisen, with the result that the disclosure was preceded by a decision to postpone disclosure. But where the insider information concerns a circumstance that has not been the subject of prior negotiations or other preparations – and thus is publicised without any decision on postponed disclosure – there is reason for issuers to consider preparing an insider list even if the information is publicised as quickly as possible.
In the light of the measures undertaken by Nasdaq Stockholm's disciplinary board, on 26 October 2021 the FI decided to refrain from intervening against the bank and to write the case off. According to the FI the decision is based on the fact that in all material respects the suspected deficiencies relate to the same course of events and circumstances as those already examined by Nasdaq Stockholm's disciplinary board, for which the bank has been issued with a penalty payment. Against this backdrop, the FI has assessed that there is no reason for further action in connection with the investigation.
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