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A European drinks company received a sanction from its national regulator for failing in its duties to properly maintain insider lists. It followed the revelation that one of the company’s non-executive directors had engaged in insider trading with the company’s shares.
The Market Abuse Regulation (MAR) provides specific detail on the obligations of companies with regard to how they handle inside information. On this occasion, the information existed, but the business did not follow the correct procedure to report all relevant information or to keep its insider list up-to-date and that resulted in a fine of €90,000.
This anonymised case study acts as a reminder for organisations to ensure that they follow the correct process for disclosing who has access to inside information and when
The background
In the late 2000s, an independent director with the drinks company had access to inside information about the forthcoming appointment of a new CEO at the business. The former was found to have bought 200,000 shares for his retirement fund in anticipation of the market moving. Although the man eventually made a loss on the purchase and did not intend to sell the shares as soon as the news became public, the regulator found that he had been in possession of the inside information when he made the purchase, which breached the market abuse rules.
The director was banned from being involved in a regulated financial firm for five years and fined €75,000 for insider dealing.
The regulator also investigated the company’s handling of the inside information and found that it had:
- Failed to update the insider list promptly to show which internal stakeholders did or did not have access to the information
- Failed to note the date of each occasion on which it updated the list
- Failed to note which external stakeholders acting on behalf of the company had access to the inside information.
What happened?
As a result of the company’s breaches, the regulator imposed a sanction of €90,000 on the business. It stated that the fine reflected the seriousness with which it took the country’s market abuse rules and the need for companies to properly maintain their insider lists.
Elaborating on the cause for the penalty, Derville Rowland, Head of Enforcement said, “The proper maintenance and updating of insider lists is essential to detect and prevent market abuse.”
The company pledged to implement new procedures to ensure that the same kind of lapse did not happen again.
How InsiderLog helps
InsiderLog is an online insider list management platform that helps you create insider lists that meet the compliance requirements of MAR and all local legislation derived from it. The software speeds up the process of collecting the necessary data and provides a template that ensures you report all of the required information in the correct format. It also logs the changes that you make to your list, providing an audit trail in the case of any future investigation.
More than 1,000 issuers and advisors trust InsiderLog to maintain compliance and keep a record of who has access to inside information at any given time. The platform also automates the process of reminding insiders to fill in their information on the list.
Request a demo of InsiderLog today.
