RE: w10 Aug 2018 16:13
When Can Directors Buy and Sell Shares?
Directors, like any other shareholders must comply with Market Abuse Regulation (MAR) 1.3.2 on inside information. This regulatory mandates that Persons Discharging Management Responsibility (PDMRs) i.e. the company statutory directors in this context cannot deal when they are in possession of price sensitive information, i.e. information that when released to the public is likely to have a material impact on the share price of the stock in question. A period of time when Directors are prohibited from dealing is referred to as a ‘closed period’.
On top of this ‘catch all’ the EU Market Abuse Regulation (MAR), Section 19 goes a step further to explicitly state that PDMRs cannot deal in the period of 30 calendar days before the announcement of interim financial results or a year end results. This is referred to as the MAR closed period. Taking the AIM market for example, companies need to publish a half year financial report within 3 months of the half year period ending and the final results within 6 months of the end of the full year. It is worth noting that the full annual report does not need to be published on the same day, the closed period can end on publication of the final results statement, assuming no additional material information will be produced in the annual report which is not included in the Final Results statement.
Let’s take a look at how this affects AIM companies specifically now. The rules prior to the adoption of EU MAR from summer 2016 were actually 60 days, so the MAR actually relaxes the closed period requirement relating to release of financial information somewhat. AIM companies as part of AIM rule 21 are though also now required to have in place at all times a dealing policy which must also specify the company’s closed periods. This dealing policy though is not required to be published publically by the company and therefore it may not always be clear whether the company is in a closed period of not.
What director deals should be disclosed to the market? When should disclosure take place?
The EU MAR sets out all the requirements, but the core requirements are the PDMR’s Name, Position within company, Volume and Value of shares. Disclosure is only required for transactions in aggregate over EUR 5,000. This does not mean PDMRs are free to deal though during closed periods, it is just that no disclosure is required for dealing below EUR5,000 in aggregate.
The PDMR must disclose to the company within 3 business days of the transaction, and the company must disclose on the same terms. I.e. if the PDMR discloses to the company after 1 business day then the company has a further 2 business days to disclose.
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