MAR

The EC has Published Proposals to Amend Existing Legislation to Promote the Use of Small and Medium-Sized Enterprise (SME) Growth Markets

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On May 24, 2018, the European Commission (“EC“) published:

  • A draft Regulation to amend the Market Abuse Regulation (Regulation 596/2014) (“MAR“) and the Prospectus Regulation ((EU) 2017/1129) in respect of promotion of the use of small and medium-sized enterprise (“SME“) growth markets.
  • A draft Delegated Regulation amending Delegated Regulation (EU) 2017/565 (the Commission Delegated Regulation) as regards certain registration conditions to promote the use of SME growth markets.

The MiFID II Directive (2014/65/EU) created a new type of trading venue, the SME growth market, as a sub-group of multilateral trading facilities (“MTFs“), to facilitate access to capital for SMEs and the further development of specialist markets to cater for the needs of SME issuers. However, the current definition of SMEs is not suitable for companies issuing bonds. In addition, SME growth market debt-only issuers have to produce a semi-annual financial report. This is a more stringent requirement than the one applying to issuers of bonds to professional investors on regulated markets.

Addressing these specific issues, the Commission’s proposals include measures that will make it easier for trading venues specialised in bond issuance to register as SME growth markets. This will be done by formulating a new definition of debt-only issuers; being those that issue less than EUR 50 million of bonds over a 12-month period.

The proposals also give more flexibility for SME growth market operators on whether or not to impose the obligation to produce semi-annual reports on SME debt-only issuers.

Other proposals include an exemption for privately-placed bonds from the ‘market sounding regime’ (subject to conditions). Market sounding is where information is given prior to the announcement of a transaction to gauge the interest of potential investors.

ESMA Issues Final Guidelines on Inside Information and Commodity Derivatives under MAR

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On September 30, 2016, the European Securities Markets Authority (“ESMA“) published final guidelines (ESMA/2016/1412) on information relating to commodity derivatives disclosable under the Market Abuse Regulation (Regulation 596/2014) (“MAR“).

Article 7(5) of MAR requires ESMA to issue guidelines to establish a non-exhaustive list of information that is reasonably expected or required to be disclosed in accordance with legal or regulatory provisions in EU or national law, market rules, contract, practice or custom, on the relevant commodity markets or spot markets.

ESMA expects market participants, investors and regulators to take the list of examples provided in the guidelines into account when assessing whether information is “inside” information. It should be noted that other conditions of the definition not covered by the new guidelines should also be taken into account.

ESMA also explains that the guidelines do not create any further information disclosure requirements, as the concept of “required to be disclosed” refers to existing or future disclosure requirements (such as, under national law), independent of the guidelines.

National competent authorities (“NCAs“) have two months from the issuance of the different language versions of the guidelines to confirm whether or not they intend to comply with them. If a NCA does not comply or does not intend to comply, it will have to inform ESMA, stating its reasons.

ESMA consulted on the guidelines in March 2016 (ESMA/2016/444).

Delegated Regulation under MAR Covering Indicators of Market Manipulation, Disclosure Thresholds, Trading During Closed Periods and Notifiable Managers’ Transactions

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The European Commission’s Delegated Regulation supplementing the Market Abuse Regulation (Regulation 596/2014) (MAR) as regards an exemption for certain third countries’ public bodies and central banks, the indicators of market manipulation, the disclosure thresholds, the competent authority for notifications of delays, the permission for trading during closed periods and types of notifiable managers’ transactions, was published in the Official Journal of the EU on 5 April 2016.

The Delegated Regulation specifies:

  • The public bodies and central banks of third countries benefitting from the exemption under Article 6(1) of MAR.
  • The indicators of market manipulation set out in Annex I of MAR.
  • The minimum thresholds for the exemption of certain participants in the emission allowance market from the requirement to publicly disclose inside information.
  • The competent authority that should be notified concerning delays in the public disclosure of inside information.
  • The circumstances under which trading in a closed period may be permitted by an issuer.
  • The types of transactions that would trigger the notification requirement under Article 19 of MAR.

The Delegated Regulation enters into force on April 24, 2016 and will apply from July 3, 2016.

ESMA Consults on Guidelines on Disclosure of Information on Commodity Derivatives Markets or Related Spot Markets under MAR

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On March 30, the European Securities and Markets Authority (“ESMA”) opened a public consultation on draft guidelines under the Market Abuse Regulation (“MAR”).

ESMA is consulting on its proposed non-exhaustive indicative list of information expected or required to be published on commodity derivatives markets or spot markets for the purposes of determining inside information regarding commodity derivatives and of triggering the prohibitions for insider dealing.

Under MAR, inside information in relation to commodity derivatives must relate to either the commodity derivatives themselves or to the related spot commodity contract. However there is a wide variety of commodities markets and commodity derivatives markets which may require distinguishing between types of information specific to these markets. ESMA is giving further consideration to the scope of the instruments or products concerned.

ESMA will consider all comments received by May 20. Consultation Paper.

European Commission Adopts Delegated Regulation on Presentation of Investment Recommendations and Disclosure of Conflict of Interest Under MAR

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The European Commission has adopted a Delegated Regulation supplementing the Market Abuse Regulation (“MAR“) with regard to regulatory technical standards for the technical arrangements for the objective presentation of investment recommendations or other information recommending or suggesting an investment strategy and for disclosure of particular interests or indications of conflict of interest (under Article 20).

The Delegated Regulation provides for rules on the identity of producers of recommendation; introduces a general standard on objective presentation of recommendations, applicable to any person mentioned in Article 20(1); sets out requirements on the maintenance of records of all recommendations produced on any issuer or financial instrument and disseminated during the preceding 12-month period and determines the general standards and additional obligations relating to disclosure of interests or of conflicts of interest. It also ensures that recommendations include the date and time on which the recommendation was first disseminated and provides for specific arrangements for dissemination of recommendations, their summary or extract and when recommendations are substantially altered.

Once approved by the Council of the EU and the European Parliament, it is expected that the Delegated Regulation will apply from July 3, 2016. The Delegated Regulation can be found here.

ECON Publishes Reports Postponing Application of MiFID II, MiFIR, MAR and CSDR

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The European Parliament’s Committee on Economic and Monetary Affairs (“ECON“) has published two draft reports on the proposed directive postponing application of the MiFID II Directive, the proposed regulation amending the Markets in Financial Instruments Regulation (“MiFIR“), the Market Abuse Regulation (“MAR“) and the Regulation on improving securities settlement and regulating central securities depositories (“CSDR“) as regards certain dates.

Both reports contain an explanatory statement, which expresses disappointment that, due to the failure of ESMA and the Commission to deliver regulatory technical standards and delegated acts by the deadline set out in the legislation, and to launch the necessary procurement procedures in time, MiFID II will not be applicable as initially scheduled on January 3, 2017. The rapporteur acknowledged that the delay of the application by a year to January 2018 was sensible and justified, given the scale of the tasks yet to be completed before implementation.

The reports can be found here and here.

Financial Services and Markets Act 2000 (Market Abuse) Regulations 2014 Published

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On November 20, the Financial Services and Markets Act 2000 (Market Abuse) Regulations 2014 were published with an accompanying explanatory memorandum.  The Regulations were made on November 19, and come into force on December 15.  They amend the Financial Services and Markets Act 2000 (FSMA) to extend until July 3, 2016 the expiry dates of:

  • the prohibition on market manipulation (s118(8) FSMA);
  • the associated provisions (s118A(2) and (3) FSMA); and
  • the definition of “regular user” (s130A FSMA).

On July 3, 2016, the Market Abuse Regulation (MAR) will take effect and the above FSMA provisions will then expire.  The s118(8) prohibition will be replaced by a prohibition with similar scope under MAR.  Regulation.  Explanatory Memorandum.

ESMA Publishes Responses to Consultations on MAR

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On October 17, the European Securities and Markets Authority (ESMA) published responses that it received to consultations published in July 2014 relating to the Market Abuse Regulation (Regulation 596/2014) (MAR) on: (i) draft technical advice on possible delegated acts concerning MAR; and (ii) draft regulatory technical standards (RTS) and implementing technical standards (ITS) on MAR.  Response.

ESMA Securities and Markets Stakeholder Group Responds to ESMA Consultations on Draft Technical Standards and Technical Advice on the Market Abuse Regulation

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On October 13, the Securities and Markets Stakeholder Group (SMSG) of the European Securities and Markets Authority (ESMA)published its response to the July consultations published by ESMA on draft technical standards and draft regulatory standards (RTS),implementing technical standards (ITS) on the Market Abuse Regulation (Regulation 596/2014) (MAR) and draft technical advice on possible delegated acts concerning MAR.

SMSG has provided, in its response, advice to ESMA on the nine topics covered in the ESMA consultations including identifying key issues in respect of market soundings, insider lists, investment recommendations and manager transactions. The SMSG also sets out general comments on ESMA’s approach to building a single rulebook on market abuse.

The closing date for responses on the ESMA consultations was October 15.  SMSG Response.