Share this post
A European bank (Company A) was fined by its country’s regulator following a share issue in which management figures were offered the chance to invest further. However, the bank failed to report two of the transactions in the direct issue. This was despite a board member of Company A also being a co-owner of firms that made trades in Company A’s stock. Ultimately, a financial sanction was imposed for breaching insider trading legislation.
This anonymised case study demonstrates the importance of adhering to the reporting requirements placed upon issuers by Europe-wide legislation. It illustrates the potential sanctions that regulators have at their disposal to send out a robust message that they will not tolerate any discrepancies in reporting, even if they are accidental and not deliberate.
The background
In the early 2020s, Company A launched a direct issue of shares in order to raise more than €4 million. Those in management positions were offered a chance to claim stock, with many doing so through other companies in which they had a key interest.
Of those who acquired shares, two businesses (Company B and Company C) were co-owned by an individual who was also a board member of Company A. As such, this made him a Person Discharging Management Responsibilities (PDMR) at Company A.
Article 19 of the Market Abuse Regulation (MAR) states that PDMRs employed by issuers and people closely associated with them must “report every transaction conducted on their own account relating to the shares or debt instruments of that issuer.” The threshold for reporting is for trades cumulatively worth more than €5,000 per calendar year, although some member states have set in place a higher figure.
The purchases by Companies B and C passed the threshold in Company A’s home country. However, Company A failed to report the transactions within the allotted three-day window.
What happened next?
The country’s regulator recognised the board member as a PDMR and took action against Company A when the failure to report was discovered, three weeks after the transactions had taken place. The regulator considered this to be a “significant delay” and imposed a penalty.
Company A’s managing director insisted that the failure to report was down to human error in transferring data from one list to another before issuing the report. He stated that the bank reported the transaction as soon as it was made aware of the error.
However, the regulator responded by saying that issuers must be diligent in their reporting relating to MAR and that there were no excuses for failing in their obligations. It issued a fine of nearly €100,000 to the bank.
How TradeLog helps
TradeLog is personal account dealing software that makes it easier for companies to monitor and understand the financial dealings of their employees and other connected individuals. By setting parameters over acceptable trades, you can prevent non-compliant transactions from taking place during the preclearance process.
You also have a record of the attempted transactions on behalf of the individual, which creates an audit trail. This allows for better record-keeping and can help with reporting of trades to regulators where necessary.
Request a demo of TradeLog for your organisation today.
