In our first update on MAR we highlighted the broadening of the scope of the Market Abuse rules that come into force on 3 July 2016.  We focused on how the new regime significantly extends the prohibition on abusive activity, capturing new instruments and behaviours.

Our second update focused on the new obligations to conduct surveillance to detect Market Abuse, obligations which apply to asset managers and proprietary traders as well as sell-side firms.

In this final update we review the changes to the market soundings regime.  MAR imposes detailed rules in this area.


One of MAR’s key objectives is to prevent insider dealing.  One way the new regime, and MAD before it, seeks to achieve this is by forcing inside information into the public domain as it arises.  To this end, issuers of securities are required to disclose as soon as possible any inside information that arises that is relevant to those securities.

An issuer may delay disclosure where it is in its legitimate interest to do so.  An example might be where disclosure of a proposed takeover could jeopardise negotiations.  In these situations, inside information may exist that has legitimately not been disclosed publicly.  It is ordinarily unlawful to disclose this inside information selectively.

A market sounding, where an issuer approaches an investor to establish appetite for a potential M&A transaction, is one example where inside information, legitimately withheld from the market as a whole, can be selectively disclosed in a lawful manner if certain conditions are met.

The old regime

Under existing rules in the UK, inside information about a potential M&A transaction can be passed to a potential investor via a ‘wall-crossing’ provided certain conditions were met.  These included that there be a reasonable and legitimate reason for doing so, consent is obtained from the investor, and the recipients must be told that they have obligations of confidence and must not deal until the inside information is made public.

However, despite these rules, there had been concern amongst regulators that inside information was being passed to potential investors without an appropriate ‘wall-crossing’ being performed, and that recipients may be abusing the information received.


As a consequence, the rules under MAR are much more prescriptive and detailed.  Provided the party conducting the market sounding complies with these rules when disclosing inside information, they will be deemed to have done so in a lawful manner.

The rules apply to all market soundings, regardless of whether inside information is in fact passed or not.  They build on existing rules and are aimed at improving the audit trail associated with market soundings.  The rules include:

  • The person conducting the sounding – a “DMP” – must consider whether inside information will be passed and keep a record of their conclusion
  • The DMP must use a script
  • Where soundings are by phone, they must be recorded
  • Where no recording is available, then written minutes are required prepared by DMP and signed by the recipient
  • A record must be kept of all those sounded and all those who did not want to be sounded

The improved audit trail will facilitate greater scrutiny and challenge by the regulator and so those conducting market soundings should be prepared for increased regulator interest.