Navigating PDMR and PCA Transactions: A Guide to Market Integrity

The Market Abuse Regulation (MAR) has significantly enhanced the disclosure requirements for Persons Discharging Managerial Responsibilities (PDMRs) and Persons Closely Associated (PCAs) to ensure market integrity and investor confidence. Understanding the key aspects of PDMR and PCA transactions is crucial for companies and individuals to comply with these regulations.

Who are PDMRs and PCAs?

PDMRs are individuals within a company who hold managerial responsibilities, have regular access to inside information, and can influence the company's future developments. PCAs, on the other hand, are individuals closely associated with PDMRs, such as family members or legal entities controlled by the PDMR.

PDMR and PCA Transaction Reporting

PDMRs and PCAs must notify their local financial authority and the issuer of any transactions involving the company's financial instruments, provided the total sum of transactions exceeds the national regulator's predefined threshold. In the EU, the default threshold is 5,000 EUR per calendar year, but member states can raise it to 20,000 EUR. For example, Spain has raised its threshold to 20,000 EUR.

Notifications must be submitted within three business days, and the issuer must release the information publicly within the same timeframe. The notification requirements also extend to relevant auctions of emission allowances and auction products or their related derivatives.

Key Differences Between MAD and MAR

The Market Abuse Directive (MAD) and the Market Abuse Regulation (MAR) have several key differences in terms of PDMR and PCA transaction reporting. Some of the main differences include:

1. Threshold for Reporting: MAD had a threshold of 5,000 EUR, while MAR maintains the same threshold by default but allows member states to raise it to 20,000 EUR.
2. Notification Deadline: MAD required notification within 15 days, while MAR reduces the deadline to 3 business days.
3. Reporting of Auctions: MAD did not require reporting of auctions, while MAR introduces reporting requirements for PDMRs and PCAs within emission allowance market participants.
4. Reporting of Pledging or Lending: MAD did not require reporting of pledging or lending, while MAR introduces reporting requirements for issuers.
5. Public Disclosure: MAD did not require public disclosure, while MAR mandates public disclosure within three working days if the total sum of PDMR transactions exceeds the threshold.

Potential Market Abuse Penalties

The penalties for PDMRs and PCAs who breach MAR have been strengthened compared to the previous MAD regime. Administrative fines can reach up to €15 million or 15% of the undertaking's total annual turnover, whichever is higher. MAR also introduces criminal penalties for market abuse offenses, including imprisonment of up to four years and fines of up to €5 million or 10% of the undertaking's total annual turnover. Additionally, MAR introduces civil liability for PDMRs and PCAs who cause losses to investors as a result of their market abuse.

In conclusion, understanding the key aspects of PDMR and PCA transactions is essential for maintaining market integrity and investor confidence. Companies and individuals must comply with the enhanced disclosure requirements under MAR to avoid potential market abuse penalties. By adhering to these regulations, PDMRs and PCAs can help ensure a fair and transparent market environment.