We consider the implications of the Market Abuse Regulations (MAR) for senior executives in PLCs, following the FCA’s fine of a non-director for failing to disclosing their dealings in the company’s shares. 

FCA issues its first fine against a PDMR for failure to report dealings under MAR

The Financial Conduct Authority (FCA) has imposed a fine on a senior executive employee of a listed company for failing to notify the FCA of dealings in the company’s shares contrary to Article 19(1) of the Market Abuse Regulations (MAR).

Under these Regulations, a person who discharges managerial responsibilities (a PDMR) of a publicly traded company must notify the company and the FCA within three business days if they deal in the company’s shares above a threshold of €5,000 in a calendar year.

A company’s directors are all PDMRs. In addition, non-directors may be a PDMR if they are a senior executive who has regular access to inside information and who has the power to take managerial decisions affecting the PLC’s future development and business prospects.

The executive sold shares in the company for a total just over £71,000 on three occasions over the course of five months in the period August 2016 to January 2017. He did not notify the company or the FCA. The FCA imposed a fine of £45,000, discounted from £64,300 for early settlement.

Key take-aways

This is the first time the FCA has brought enforcement action against a PDMR for breaching article 19(1) of MAR. The facts of the case are relatively straightforward. What is more interesting are the reasons the FCA gave for why it considered the executive to be a PDMR:

  • the executive was not a board director, or an FCA-Approved Person, but he was one of four members of the company’s executive committee, alongside the CEO and two other senior executives. Through the ExCom, he had regular access to inside information, including the group’s monthly management accounts; and
  • in July 2016, the company had informed him that he was considered to be a PDMR because he had access to inside information by virtue of his role. At the same time, it sent him a memo on MAR and inside information, and the company’s share dealing policy and code with acknowledgements which he countersigned (albeit belatedly, in November 2016).

The decision underlines the importance for executives of complying with a company’s share dealing policy. Had the executive done so in this case, the company would have been able to remind him that he was a PDMR and the appropriate notifications would most likely have been made to the market.

Key tip

When assessing the seriousness of the breach, the FCA also observed that the executive was not provided with any individual training on MAR and his responsibilities as a PDMR. Whilst the FCA made no finding as to the adequacy of the PLC’s compliance with, or its policies and procedures in relation to MAR, it may well be prudent for companies to consider appropriate training, beyond written documentation simply advising PDMRs of their duties.