Undeclared Dealings in Shares Result in Fines

3rd January 2020 Corporate

The Financial Conduct Authority has fined Mr Kevin Gorman, a manager of Braemar Shipping Services plc (“Braemar”) £45,000 for failing to declare his dealings in Braemar shares. This is the first time the FCA has issued a fine for breach of article 19(1) of the Market Abuse Regulation (“MAR”).

MAR requires persons discharging managerial responsibilities for an issuer of listed securities (“PDMRs”) to declare any dealings in those listed securities within three days of them taking place, if the relevant dealings involve consideration of more than €5,000 in any 12 month period. This is to allow the issuer to make announcements of the relevant dealings to the market, and is considered by the FCA to be a preventative measure against market abuse as well as useful information for investors to hold. The FCA also considers that market transparency is essential to market and shareholder confidence in an issuer.

While the MAR regime has been in place since 2016, it is still sometimes not appreciated that it applies to a wider group than main board directors. PDMRs include not just board directors but any senior executive who has regular access to inside information relating directly or indirectly to the issuer and the power to take managerial decisions affecting future developments and the business prospects of the issuer. In the case of Mr Gorman, he was both CEO of Braemar’s logistics division and a member of its five-person group executive committee. This committee received monthly group management accounts and high level confidential information was also discussed. Mr Gorman was clearly a PDMR, and had even been notified by Braemar that this was the case.

Despite being a PDMR, Mr Gorman dealt in shares in Braemar on three occasions between August 2016 and January 2017, resulting in proceeds of approximately £71,000, without making the required notifications. He had been provided with briefing notes on his responsibilities but stated that he had not read them. The FCA did not consider that his resulting ignorance amounted to a defence. He had clearly breached his responsibilities and the FCA imposed their fine as a result.

It is vitally important for all persons involved in senior management of an issuer of listed securities or its group, irrespective of whether they are main board directors or not, to ensure that they understand their obligations as a result including whether they are a PDMR and need to disclose dealings in relevant securities. The FCA will not consider ignorance a defence, and substantial fines can be imposed as a result of any breach of regulation.

JMW’s corporate team advise on all aspects of listed company regulation, and can provide appropriate briefing notes and individual training on MAR and other relevant issues.

This article is for general guidance only and should not be used for any other purpose. It does not constitute and should not be relied upon as legal advice.

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Martin John is a Partner located in Londonin our Corporate and Commercial department

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