Archive for the ‘Regulatory’ Category

When the logbook goes beyond Facebook / Martin

03/07/2016. | This post has no Comments

EU legislators have worked hard for several years to “reduce” unnecessary administrative burdens associated with insider lists. And here is what some may call a “remarkable outcome” coming into effect on July 3, 2016 under the new Market Abuse regime:

  • Extension of the obligation to maintain insider lists from the regulated market issuers to issuers whose instruments are traded on MTFs and OTFs;
  • Extensive list of personal data going beyond what is stored in HR systems or data subject’s Facebook account;
  • Great deal of exposure for every entity responsible for maintaining the insider lists to highly demanding requirements of the Regulation (EU) 2016/679 (General Data Protection Regulation, effective May 2018) and sanctioning regime thereunder with administrative fines in the range of EUR 20 000 000;
  • EUR 1 000 000 as administrative pecuniary sanction for infringements related to insider lists by legal persons required to maintain them (extends to issuers as well as any legal person acting on their behalf or on their account);
  • EUR 500 000 as maximum administrative pecuniary sanction for infringements related to insider lists by natural persons: employee(s) and senior officer(s) responsible for this field of compliance are primarily exposed here.

Thus to sleep well after July 3, you have to be sure among others that:

  • Your insider lists are drawn up and maintained in full compliance with Article 18 of the Market Abuse Regulation (EU) 596/2014 and implementing regulations thereof;
  • You draw up and maintain deal-specific or event based sections of the insider list in compliance with Annex I Template 1 of the Commission Implementing Regulation (EU) 2016/347;
  • You draw up and maintain permanent insiders section of the insider list in compliance with Annex I Template 2 of the Commission Implementing Regulation (EU) 2016/347
  • That any person on the insider list acknowledges in writing the legal and regulatory duties entailed and is aware of the sanctions applicable to insider dealing and unlawful disclosure of inside information in compliance with Article 18 (2) of the Market Abuse Regulation (EU) 596/2014;
  • That you draw up and properly maintain a list of all persons discharging managerial responsibilities and persons closely associated with them as required by Article 19(5) of the Market Abuse Regulation (EU) 596/2014;
  • That persons discharging managerial responsibilities and persons closely associated with them are properly notified about their obligations under Article 19 of the Market Abuse Regulation (EU) 596/2014, i.e. obligation to notify the issuer and competent authority about transactions made with shares or debt instruments of that issuer or to derivatives or other financial instruments linked thereto;
  • As an issuer you ensure that transactions notified by persons discharging managerial responsibilities and persons closely associated with them are made public promptly and no later than three business days after the transaction;
  • That persons discharging managerial responsibilities within an issuer do not conduct transactions during a closed period of 30 calendar days before the announcement of an interim financial report or a year-end report as required by Article 19 (11) of the Market Abuse Regulation (EU) 596/2014;
  • You have a solution in place to simplify and support transaction notification by persons discharging managerial responsibilities, persons closely associated with them as well as for other stakeholders that are bound by notification under the personal account dealing rules, policies and procedures;
  • You have a clearance procedure to manage exceptions to the trading restriction provided under Article 19 (11) of the Market Abuse Regulation (EU) 596/2014
  • You have proper procedures and records to manage delay of inside information pursuant to Article 17 (4)-(6) of the Market Abuse Regulation (EU) 596/2014.

INSIDeR has supported EU issuers with the above compliance issues for more than 10 years.

Improved and adapted, it continues to be the best solution available to handle any of the above requirements in accordance with the new Market Abuse regime.

Regulator fines Aviva Investors £18m for control failures / Mait

24/02/2015. | This post has no Comments

The Financial Conduct Authority has hit Aviva Investors with its second largest fine on record for a UK asset manager after finding the group’s traders manipulated deals to boost their fees at the expense of customers.

The watchdog on Tuesday issued the fund management arm of Aviva, the FTSE 100 insurance and investment group, with an £18m penalty for failing to prevent an “abusive practice” known as cherry-picking for as long as eight years.

The punishment comes as the UK’s £5tn asset management industry attracts increasing scrutiny from regulators. Just last week, the FCA warned the sector was not doing enough to guard against potential insider trading and market abuse.

It forms part of a campaign by the authority to ensure financial services professionals put the interests of their clients first. In issuing the penalty on Aviva, the FCA said that ensuring asset managers manage potential conflicts of interest effectively would “continue to be an area of focus” for the regulator.

The watchdog said the failings arose as the same trading desks at Aviva Investors, which manages almost £240bn worth of assets, handled multiple funds that charged varying levels of fees.

Traders were presiding over assets for external hedge funds — which Aviva charged fees of up to 20 per cent — as well as the company’s own life insurance policyholders, according to people familiar with the matter.

Instead of booking bond trades immediately to a particular fund, they would wait to see how the positions performed — and then allocate them to the funds depending on their performance fees.

For instance, the FCA said, a trader could buy a security in the morning intending to allocate it to a hedge fund, but six hours later, after seeing it fall in value, allocate it instead to another fund that charged low or no fees.

The practices would allow the traders involved to benefit financially, as they would receive a cut of the charges.

Full story >

Deadline for ESMA’s Discussion Paper on Possible Implementing Measures Under the Market Abuse Regulation / Martin

27/01/2014. Tags: , , , , , | This post has no Comments

Today was the closing date for comments to the the European Securities and Markets Authority’s (ESMA) Discussion Paper (dated 14.11.2013) on Possible Implementing Measures Under the Market Abuse Regulation. Topics of the Discussion Paper included among others the following key elements of the Market Abuse regime that is pending for renewal under the Market Abuse Regulation:

> Buyback programmes and stabilisation
> Specification of the indicators of market manipulation
> Public disclosure of inside information and delays
> Insider list
> Managers’ transactions

By using valuable views from our customers we were able to contribute to the consultation on various items considered by ESMA on insider lists and related topics of compliance management.

Download: MarketAbuseRegulations_ESMA_comments_CSA_27.01.2014 (PDF).

All contributions received by ESMA will be published shortly.

Divergence in Member States’ use of sanctions under the Market Abuse Directive / Ahto

02/02/2012. | This post has no Comments

Proposals to Reshape the Market Abuse Framework in the EU / Ahto

21/10/2011. | This post has no Comments

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

http://europa.eu/rapid/pressReleasesAction.do?reference=IP/11/1217&format=HTML&aged=0&language=EN&guiLanguage=en

  • Proposal for a Regulation of the European Parliament and of the Council on insider dealing and market manipulation (market abuse)

http://ec.europa.eu/internal_market/securities/docs/abuse/COM_2011_651_en.pdf

  • Proposal for a Directive of the European Parliament and of the Council on criminal sanctions for insider dealing and market maniuplation

http://ec.europa.eu/internal_market/securities/docs/abuse/COM_2011_654_en.pdf

  • Commission’s Impact Assessment Accompanying the document Proposal for a Regulation on insider dealing market manipulation (market abuse)

http://ec.europa.eu/internal_market/securities/docs/abuse/SEC_2011_1218_en.pdf

  • Official FAQ

http://europa.eu/rapid/pressReleasesAction.do?reference=MEMO/11/715&format=HTML&aged=0&language=EN&guiLanguage=en

  • Note from Freshfields Bruckhaus Deringer on the review of the Market Abuse Directive

http://www.freshfields.com/go/pdfs/Bank-of-the-Future-MAD-review-note.pdf

FSA Market Watch, Issue No 37 / Ahto

24/09/2010. | This post has no Comments

The UKA FSA has published the September 2010 edition (Issue No. 37) of its Market Watch newsletter. The newsletter deals with leaks of inside information.

During the past two years, the FSA conducted various intensive enquiries into disclosures of inside information to the media prior to certain announcements.

The aim of these enquiries was to identify suspicious contact between insiders to a corporate transaction and the media and included discussions with regulated firms as to their policies governing such contacts. In addition, the FSA continued its thematic work assessing regulated firms’ systems and controls on handling leaks.

The newsletter introduces the background and sets out the main findings on both work streams. It also contains a list of best practice recommendations in connection with contact with the media where the FSA believes improvement is necessary.

The FSA will continue to monitor for leaks of inside information. If no improvement is noticed in the level of leakage within the markets, the FSA is prepared to consider rule changes. However, it will also take action where it considers that unacceptable practices have occurred or existing systems and controls requirements applying to regulated firms and issuers have been breached.

Market Watch is available:

http://www.fsa.gov.uk/pubs/newsletters/mw_newsletter37.pdf

Dealings by Employees and Managers on the Rise Calls for Review of Systems and Controls / Ahto

20/08/2009. | This post has no Comments

Recent fall of the markets combined with first signs of recovery has once again turned shares to be affordable and attractive investment alternative to increasing number of public companies’ employees and managers. It is probably true that many of them are about to make greatest investments of the lifetime.

It is also clear that the higher level of personal account deals means higher risk of transactions that can instead of becoming great investment, turn out to be a worse nightmare not only for the investor, but also to the company.

No company wants to see headlines talking about badly timed sale or purchase of shares ahead of material news published about the company. The risk is particularly high due to increased sensitivity and nervousness still present in the markets, which includes tendency to overreact to both positive and negative news.

Thus call for review and tightening of systems and controls is pretty obvious and should be considered by all legal and compliance departments of publicly traded companies.

Below are just few general questions that those in charge of insider and personal account dealing policies may find useful to consider:

  1. Have all members of the staff been provided adequate training about the content and of the insider policy and applicable restrictions on personal account dealing?
  2. Do your personal account dealing rules require changes in holdings in company’s shares to be reported to the compliance function?
  3. Do personal account dealing provisions require advance clearance of personal transactions? Prior to providing clearance (i.e. permission to trade), is there an arrangement in place for determining that:
  • There is no closed-window (based on law or market rules) period to prevent the applicant from making the contemplated transaction;
  • The applicant is not exposed to any specific matter that is qualified and treated as inside information (inter alia by checking records of opened project-specific lists of insiders) at the time of the application;
  • There is no such matter ongoing in the company, which can clearly be qualified as material inside information, and which would expose the applicant to undue suspicions even in case the applicant is unaware of this particular matter.
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