ESMA publishes Q&As on the Market Abuse Regulation

On 26 October 2016, the European Securities and Markets Authority (ESMA) published updated Q&As regarding the implementation of the Market Abuse Regulation (MAR).

The advice added by ESMA covers the following issues:

Managers’ transactions

When determining, for the purposes of transactions under Article 19(1) of MAR, whether the Article 19(8) threshold of €5,000 has been crossed where a transaction is carried out in a currency other than the Euro, the exchange rate to be used is the official daily spot foreign exchange rate applicable at the end of the business day on which the transaction is conducted - where available, the European Central Bank’s daily Euro forex reference rate, published on the ECB website, should be used.

Investment recommendation and information recommending or suggesting an investment strategy

Communications made orally or via electronic means

A communication meeting the definition of “investment recommendation” in Article 3(1)(35) of MAR (as read in conjunction with Article 3(1)(34)) will be deemed to fall within the scope of the investment recommendation regime.

When assessing whether or not a communication is an "investment recommendation", one should look at the communication’s substance, rather than how it is labelled, its format and form or whether it is communicated electronically, orally or otherwise.

ESMA provides the example of communications labelled as “morning notes” or “sales notes” - whether these should be considered to be investment recommendation within the meaning of MAR needs to be established on a case-by-case basis.

ESMA also notes that standardised communications which are structured for distribution channels and which suggest (implicitly or explicitly) an investment strategy in relation to a financial instrument or issuer should be regarded as "investment recommendations".

Communications which do not refer to one or several financial instruments or issuers

An “investment recommendation” is defined in Article 3(1)(35) of MAR as being:

"information recommending or suggesting an investment strategy, explicitly or implicitly, concerning one or several financial instruments or the issuers, including any opinion as to the present or future value or price of such instruments, intended for distribution channels or for the public".

Consequently, a communication that does not refer to either a financial instrument or an issuer should generally not be considered an investment recommendation.

However, a communication which relates solely to spot currency rates, sectors, interest rates, loans, commodities, macroeconomic variables or industry sectors and which does not refer to a financial instrument or an issuer would be considered to be “investment recommendation” if it contains information which allows a reasonable investor to deduce “that the communication is implicitly recommending specific financial instruments or issuers and provided that the other criteria of the definition of “investment recommendation” within the meaning of Article 3(1)(35) in conjunction with Article 3(1)(34) of MAR are met”.

ESMA provides the example of an opinion on a specific sector composed of a very limited number of issuers and states that such an opinion may be considered an investment recommendation regarding those issuers.

Position of an investment firm producing investment recommendations where this is not its main business

Any information comprising direct or indirect investment proposals in respect of a financial instrument or an issuer should be regarded as being information recommending or suggesting an investment strategy as defined under Article 3(1)(34)(i) of MAR.

This is regardless of whether or not production of investment recommendations is the main business of the investment firm.

ESMA seeks to clarify that the condition “whose main business is to produce investment recommendations” in Article 3(1)(34)(i) concerns any person other than independent analysts, investment firms and credit institutions.

Statements such as a financial instrument being “undervalued” or “overvalued” included in material intended for distribution channels or for the public

Under Article 3(1)(34) of MAR, information which implicitly recommends or suggests an investment strategy, insofar as it contains a valuation statement as to the price of the concerned financial instruments would include material which: 

• concerns one or several financial instruments admitted to trading on a regulated market or a multilateral trading facility (or for which a request for admission to trading on such a market has been made), or

• is traded on a multilateral trading facility or an organised trading facility, and

• contains an estimated value such as a “quantitative fair value estimate” that is providing a projected price level or “price target”; or

• contains any other element of opinion regarding the value of the financial instruments.

An investment recommendation under MAR must comply with the relevant obligations and standards set out in MAR and in Commission Delegated Regulation “for objective presentation of investment recommendations or other information recommending or suggesting an investment strategy and for disclosure of particular interests or indications of conflicts of interest”.