Preventing Insider Offences in light of the COVID-19 Pandemic

Further to a circular published last month, the MFSA has published a new circular addressed to entities listed on the MSE Main Market or on the Prospects MTF (the “Circular”).

Inside Information

Through the Circular, the MFSA once again reminded the market that in terms of the Market Abuse Regulation (“MAR”), issuers are required to disclose inside information as soon as possible. The MFSA noted that “any knowledge of a significant impact on the issuer, performance or prospects due to the COVID-19 pandemic should be promptly disclosed if it qualifies as inside information”.

Naturally, inside information (including that relating to the COVID-19 pandemic) needs to be published in compliance with MAR, in other words, it needs to be published in an accurate, precise and sincere manner which ensures full and effective distribution, and allows investors to have equal access to the information.

Lists of Insiders

The MFSA reminded those issuers that have designated specific individuals to monitor its exposure to pandemic-related risks, to include the said individuals on the issuer’s list of temporary insiders (provided they are not already included on its list of permanent insiders) once the effects of the pandemic on the issuer’s business, its prospects and/or the measures taken with respect to COVID-19, are considered to be inside information in terms of MAR.

Any individual listed in an insider’s list is presumed to have access to inside information and is consequently strictly prohibited from (a) unlawfully disclosing the inside information, and (b) trading in the securities of the issuer concerned until such information is made public (and therefore ceases to be inside information).

Closed Periods

In the Circular, the MFSA pointed out that in terms of MAR, any person discharging managerial responsibilities (“PDMR”) within an issuer must not conduct any transactions on its own account or for the account of a third party, directly or indirectly, relating to the issuer’s financial instruments (or related derivative instruments) for a period of 30-calendar days before the announcement of an interim financial report / year-end report.

The term “announcement” is the public statement whereby issuers announce the information included in an interim / year-end financial report, that they are obliged to make public. The date of the “announcement” marks the end date for the thirty-day closed period.

With respect to year-end financial reports, the “announcement” refers to the public statement whereby an issuer announces; in advance of the publication of its final year-end reports, the preliminary financial results agreed by its management body and which will be included in that report (see Listing Rule 5.54). This announcement will amount to an “announcement” in terms of MAR if the disclosed preliminary financial results contain all the key information relating to the financial figures expected to be included in the year-end report. It is important to note that preliminary financial results should only be published once an issuer’s auditors give their go-ahead.

Naturally, if the COVID-19 pandemic affects issuers’ preparation of financial reports, and causes them to publish their reports after the reporting deadlines, then issuers’ closed periods will also be affected. In this respect, please see other MFSA guidance which relaxes the Listing Authority’s policy of suspending the trading of financial instruments when issuers fail to meet reporting deadlines.