The European Commission has published its legislative proposals which revise the Market Abuse Directive. The proposed new framework consisting of a Regulation (directly applicable rules) and a Directive aims at:
- adaptation of the EU rules to the new market reality, in particular by extending their scope to financial instruments only traded on new platforms and over-the-counter, as well as adapting rules to new technology
- clarifying that market abuse occurring across both commodity and related derivative markets is prohibited
- reinforcing cooperation between financial and commodity regulators
- introducing tougher and greater harmonisation of sanctions (including criminal sanctions), and
- reducing administrative burdens on small and medium sized issuers.
As for insider lists the Commission has concluded that differences in national laws implementing the MAD have imposed unnecessary administrative burdens on issuers. The Regulation aims to eliminate these by providing that the precise data to be included in such lists should be defined in delegated acts and implementing technical standards adopted by the Commission.
Applying the new market abuse framework of the Regulation in an undifferentiated manner to all SME growth markets may deter issuers on those markets from raising capital on the capital markets. Without prejudice to the objectives of preserving the integrity and transparency of financial markets and of protecting investors, the proposal therefore adapts the market abuse framework to the characteristics and needs of issuers whose financial instruments are admitted to trading on SME growth markets.
The scope and size of the business of those issuers is more restricted and the events giving rise to the need to disclose inside information are typically more limited than those of larger issuers. The Regulation therefore requires those issuers to disclose inside information in a modified and simplified market-specific way. Such inside information may be published by those SME growth markets, on behalf of those issuers, in accordance with a standardised content and format defined in implementing technical standards adopted by the Commission. Those issuers are also exempt, under certain conditions, from the obligation to keep and constantly update insiders’ lists.
The Regulation further clarifies the scope of the reporting obligations in relation to managers’ transactions. These reports serve important purposes by deterring managers from insider trading and providing useful information to the market about the manager’s view on the price movements of the shares of the issuers. The Regulation clarifies that any transaction made by a person exercising discretion on behalf of a manager of an issuer or whereby the manager pledges or lends his shares must also be reported to the competent authorities and be made accessible to the public. Moreover, it introduces a threshold of €20 000, uniform in all Member States, which triggers the obligation to report such manager’s transactions. This higher threshold will contribute also to reducing the administrative burden on SMEs.
The proposal now passes to the European Parliament and the Council for negotiation and adoption. Once adopted the regulation would apply from 24 months after its entry into force.
Relevant links & valuable resources:
- Copy of the press release
- Proposal for a Regulation of the European Parliament and of the Council on insider dealing and market manipulation (market abuse)
- Proposal for a Directive of the European Parliament and of the Council on criminal sanctions for insider dealing and market maniuplation
- Commission’s Impact Assessment Accompanying the document Proposal for a Regulation on insider dealing market manipulation (market abuse)
- Note from Freshfields Bruckhaus Deringer on the review of the Market Abuse Directive