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Slaughter and May

| 3 minutes read

Holding back the tide? UK MAR and EU MAR to remain aligned, for the while

In Bulmer v Bollinger [1974] Lord Denning famously observed that "[EU law] is like an incoming tide. It flows into the estuaries and up the rivers. It cannot be held back." Under the European Union (Withdrawal) Act 2018, on 31 December 2020 at 11:00 pm the Brexit implementation period is due to expire and with it the mechanism whereby EU law automatically forms part of UK domestic law will be switched off. In other words, the incoming tide will be held back.

In theory the tide of new EU laws (and amendments to existing EU laws) will be held back immediately. On 1 January 2021 for example, certain changes to the EU Market Abuse Regulation ('EU MAR') will apply in the EU. These changes will just miss out, by a matter of hours, on being directly applicable in the UK and they will therefore not be included within the UK Market Abuse Regulation ('UK MAR', the on-shored version of EU MAR) under the EU (Withdrawal) Act 2018. Absent further specific UK legislation therefore, there will be day one divergence between EU MAR and UK MAR.

But these changes to EU MAR are primarily technical in nature, correcting existing mistakes. In particular, among other changes: (i) they clarify that the obligation to draw up insider lists rests both with issuers and any person acting on their behalf (the current text of EU MAR suggests that this is an either/or obligation); and (ii) they extend the deadline for an issuer to make public information on transactions carried out by persons discharging managerial responsibilities (‘PDMRs’) to two days after notification to the issuer by the PDMR (under current EU MAR the issuer has the same deadline as the PDMR, three days after the transaction, which can make compliance by the issuer logistically impossible). Not so much a legislative tide in this instance, but mere disposal of regulatory flotsam and jetsam to help the waterways run more freely. 

As my colleague Selmin has discussed, much has been made of HM Treasury's plans to diverge from EU financial services regulation in certain areas. But it is worth noting that the Chancellor's 23 June statement also hinted at the general possibility of regulatory alignment in other areas: "In addition to these measures set out above, HM Treasury will continue to maintain a global outlook on regulatory best practices, regardless of where those practices come from.

More specifically, in the same statement the Chancellor also confirmed that under the upcoming Financial Services Bill, amendments will be made to UK MAR "to confirm and clarify that both issuers and those acting on their behalf must maintain their own insider lists and to change the timeline issuers have to comply with when disclosing certain transaction undertaken by their senior managers". The detail remains to be seen, but it looks as if these amendments will align with the EU changes.

Negotiations on the future relationship between the UK and the EU continue to ebb and flow. But under any plausible scenario it seems that from 1 January 2021 the UK and the EU will be able to choose to diverge from or align with each other's financial services regulatory frameworks on an issue by issue basis. This choice may not always be obvious and the basis upon which the UK chooses to align or diverge might not become clearer until after the conclusion of HM Treasury's upcoming review into how financial services policy and regulation are made in the UK. At the very least, though, it is welcome that the UK is seeking to correct existing mistakes, irrespective of whether that means divergence (as in the case of the PRIIPs Regulation) or alignment (as in the case of MAR).

Folklore has been unfair to King Canute. He wasn't trying to halt the tide, but simply demonstrating to his courtiers the limits of his earthly powers. HM Treasury's approach is similarly subtle. It is not so much intending to hold back the tide of new laws in all respects, but simply managing which ones flow into the estuaries and up the rivers and which ones are held back.