EU Market Abuse Regulation likely to create significant compliance headache says Linklaters research

But research reveals that 80% of UK companies have yet to start preparing in earnest for the new rules

More than 80% of UK listed companies expect to have to spend significant time preparing for the EU Market Abuse Regulation, according to new research from global law firm Linklaters. Despite this, just 20% of companies have started the preparation needed to be able to comply with the new rules when they come into force, in less than five months’ time.

The EU Market Abuse Regulation – which takes effect on 3 July 2016 - brings in a new set of rules affecting listed companies in the EU, including the UK, relating to disclosure of inside information, insider lists, senior managers’ dealings and market abuse.  The new rules are similar to the existing ones for Main Market companies, but with some notable differences. In particular there are a number of new and prescriptive procedural requirements which will require significant forward-planning. For companies quoted on AIM, the impact will be even greater as some of the rules are completely new for them.

Among the new rules will be the requirement for companies to record and report to the Financial Conduct Authority exactly when a decision to delay disclosure of inside information to the market is made and by whom.  According to the research – based on a survey of UK company secretaries and other compliance advisers* – just 11% of companies currently have systems that capture this information.

Most companies say that as a result of new requirements such as this, they will need to devote significant time to updating their systems and procedures.  According to the research, 43% of companies expect to have to dedicate more than 100 hours preparing for the new rules between now and July.  A further 40% expect to spend between 50-100 hours.

Dealing with the new rules once they come into force is also expected to take up significant board time.  The research has revealed that 45% of companies expect their boards to spend a ‘great deal’ or ‘quite a lot’ of time focusing on the new requirements from July onwards.

Lucy Reeve, Linklaters senior corporate lawyer, said:

“The changes coming into force in July are the most dangerous kind of changes because the new rules are so similar to the existing ones. This poses a challenge to compliance departments and company secretaries who need to make sure their companies and their boards operate under the new regime from July and don’t fall back into old habits.”

She added:

“The new regime will be much more prescriptive on procedural matters such as record-keeping. This means there is both a huge amount for companies to do to prepare before July and an increased workload after July when they start living with the new requirements.”

For more information please contact Rupert Winlaw on +44 20 7456 3219.