ESMA MAR Q&As updated

On 01 September 2017, the European Securities and Markets Authority (ESMA) again updated its Q&A on the Market Abuse Regulation (MAR).

The changes include new Q&As on:

• the scope of the financial instruments subject to the market sounding regime, and
• who has to keep an insider list and the issuer’s responsibility where it delegates the drawing up of an insider list.

This new guidance confirms the approach that is currently being taken in practice although the Q&A does clarify that the persons acting on behalf of the issuer (such as investment banks and law firms) have a direct obligation to maintain insider lists.

Scope of financial instruments subject to market sounding regime

The market sounding regime (in Article 11 of MAR) provides a safe harbour from the offence of unlawful disclosure of inside information. A market sounding for these purposes is the communication of information to one or more potential investors prior to the announcement of a transaction to gauge their interest in a possible transaction and the conditions relating to it.

ESMA confirms that the financial instruments covered by the market sounding regime are the financial instruments specified in Article 2(1) of MAR. It states that:

• Where the financial instrument (which is the subject of the possible transaction) is already admitted to trading (or a request for admission to trading has been made) or is traded on a trading venue, then that transaction falls within the scope of the regime. For example, where there is a secondary offering such as a rights issue.
• Where the financial instrument (which is the subject of the possible transaction) is not admitted to trading (nor a request for admission to trading has been made) nor traded on a trading venue, the financial instrument can only fall within the regime if its price or value depends on or has an effect on the price or value of another existing financial instrument in scope of MAR.

It is up to the disclosing market participant (DMP) to assess and document (on a case by case basis) whether there is any relationship between the price or value of the financial instrument that is the subject of the sounding and any other existing financial instrument in the scope of MAR. For example, this could apply to an equity IPO where the issuer already has listed debt or where its parent company is listed.

ESMA advises that where there is uncertainty as to whether there is a price or value relationship, an appropriate approach would be for the DMP to follow the market sounding regime in case it emerges later that such a relationship existed.

Insider lists

Article 18 of MAR requires issuers and any person acting on their behalf or account to draw up and maintain an insider list and to provide it to the national competent authority on request.
ESMA confirms that:

• not only the issuer but also all persons acting on their behalf or on their account, such as advisers and consultants (which includes investment banks and law firms), are subject to (and personally responsible for) the obligation to draw up and maintain an insider list and to provide it to the national competent authority on request
• the issuer is not responsible for those advisers or consultants (or others) complying with their obligations, and
• an issuer will only be responsible for the actions of a third party where the issuer has delegated the task of drawing up and maintaining the issuer’s insider list to that third party.