First FCA fine for trades by a PDMR

26th February 2020

Background

Article 19(1) of the Market Abuse Regulation (MAR) requires persons discharging managerial responsibilities (PDMRs), and persons closely associated with them (PCAs), to notify the Financial Conduct Authority (FCA), and the issuer, of every transaction conducted on their own account. The notification must be made promptly and no later than three business days after the relevant transaction. The only exception is if the total amount of transactions per calendar year is less than €5,000.

Once the issuer has been notified by the PDMR, the issuer must then under Article 19(3) MAR, publicly announce that information promptly and no later than three business days after the transactions.

According to the FCA, “The Article 19 notification regime is a preventative measure against market abuse and can provide valuable timely information to investors. In addition, market transparency is a prerequisite for the confidence of markets and of the company’s shareholders. Failure to notify dealing transactions by PDMRs in the shares of their issuers undermines the FCA’s strategic objective of ensuring that the relevant markets function well, and its operational objective of protecting and enhancing the integrity of the UK financial system.”.

Facts

Braemar Shipping Services plc (Company) is listed on the main market of the London Stock Exchange. Kevin Gorman was employed as the managing director of the Company’s Logistics Division. He was a senior employee and a member of the executive committee, although not a full board member. According to the FCA, Mr Gorman was a person discharging managerial responsibilities as defined under Article 3(1)(25) MAR because he was a senior executive with regular access to confidential management information and therefore having or likely to have inside information and the power to make managerial decisions affecting the company’s future development and business prospects.

In this case, Mr Gorman was found to have sold shares worth a total of £71,235.28 on three occasions between 24 August 2016 and 18 January 2017 without informing the FCA or the Company within the required 3 business days. This was in breach of Article 19(1) MAR and, as a result, the Company was not in a position to announce the necessary PDMR notifications to the market in accordance with Article 19(3) MAR.

Mr Gorman also failed to seek prior authorisation from the Company to trade, as required by the Company’s internal policies, which resulted in the Company not being given the opportunity to approve or reject his personal account dealing. However, the executive was not found to have traded whilst in the possession of any inside information.

As a result of the breach of Article 19(1) MAR, the FCA imposed a fine of £45,000 on Mr Gorman. This fine represented a 30% discount on the penalty of £64,300 which would otherwise have been imposed had Mr Gorman not agreed to settle.

WM Comment

This is the first enforcement action by the FCA under Article 19 of MAR and shows that the authority is prepared to police the PDMR notification regime.