EU review of Market Abuse Regulation

ESMA is consulting on a wide-ranging review of the Market Abuse Regulation (MAR), following a formal request for technical advice, as MAR requires the European Commission to report to the European Parliament and Council on the application of certain MAR provisions and whether MAR should be amended.

The areas covered that are of interest to corporates include the definition of inside information and when disclosure of it can be delayed; insider lists; PDMR dealings, the share buyback exemption and market soundings.

The consultation closed on 29 November 2019 and ESMA is expected to send a final report to the Commission by spring 2020.

Summarised below are some of the areas that ESMA is consulting on.

Definition of inside information

ESMA is consulting on whether:

• there have been any difficulties in identifying what information is
  inside information and the timing of when information becomes inside
  information;
• the definition is sufficient to combat market abuse; and
• there is any inside information that is not covered by the
  definition.

It also raises specific questions on commodity derivatives, front running and pre-hedging.

Delayed disclosure of inside information

ESMA is gathering information to find out how the ability to delay is used in different EU countries. It is requesting information on:

• whether the conditions for delay are sufficiently clear;
• which Member States have opted to require a written explanation of
  the reasons for a delay only on request;
• how many requests for written explanations have been made;
• whether MAR should include a requirement for issuers to have systems
  and controls for identifying, handling and disclosing inside
  information;
• any circumstances in which the identification of when information
  becomes inside information was problematic; and
• if an issuer has delayed disclosure and the information then ceases
  to be inside information, whether issuers should have to notify the
  National Competent Authority (NCA) (which they don’t currently have
  to do) as this would enable the NCAs to identify better any possible
  cases of insider dealing.

Insider lists

ESMA’s preliminary view on the usefulness of insider lists is that these are a key tool for investigating possible market abuse infringements and should be retained.

ESMA is consulting on:

• whether insider lists should only include persons who actually access
  the inside information (as opposed to those that could access inside
  information) and, if they should, what systems and controls would be
  needed;
• whether the scope of Article 18(1) should be expanded to include
  ‘persons performing tasks through which they have access to inside
  information’ (irrespective of whether they act on behalf of or on
  account of the issuer), for example, accountants and notaries;
• the usefulness of the permanent insider section and who should be
  included in that section. ESMA’s view is that only an extremely
  limited group of individuals are permanent insiders; and
• amending MAR to allow the issuer to include on their insider list one
  contact person at an external service provider and for the service
  provider to then keep its own list with the details of everyone who
  has access to the issuer’s inside information instead of the issuer
  having to keep such long lists.

PDMR transactions

ESMA is considering whether:

• the €5,000 threshold should be increased and, if so, to what;
• NCAs should still be able to increase that threshold (currently they
  can opt to increase it to €20,000) and, if so, what the threshold
  should be increased to;
• the current method of identifying the MAR closed period is working;
• the restriction on dealings in a MAR closed period (which currently
  only applies to PDMRs) should be extended to issuers and to persons
  closely associated with PDMRs; and
• the exemptions that allow trading in a closed period should be
  extended to cover other situations, in particular to allow the
  immediate sale of all financial instruments and not just shares.

Share buybacks

ESMA is considering the scope of the current reporting obligations and the content of the information that must be reported to fall within the share buyback exemption.

ESMA is considering the following possible changes:

• allowing issuers to report a share buyback to only one trading venue
  (which would be the most relevant in terms of liquidity) instead of
  the current requirement to report each transaction to the NCS of all
  trading venues on which the shares are admitted to trading or traded.
  That NCA would then, on request, forward the information to other
  trading venues where those shares are admitted to trading;
• reducing the amount of information that has to be reported; and
• allowing issuers to disclose share buyback transactions to the public
  on an aggregated basis.

Market soundings

ESMA is proposing:

• amending Article 11 to clarify that issuers must comply with Article
  11 for the behaviour to be a market sounding and fall within the
  exception to unlawful disclosure of inside information. It would not
  be optional;
• including the administrative sanctions for non-compliance in MAR to
  ensure that there is a level playing field; and
• clarifying the scope of the definition of market sounding as it is
  very wide.

ESMA is also consulting on:

• which stages of the interaction between DMPs and the potential
  investors, from the initial contact to the execution of the
  transaction, should be covered by the definition of market soundings;
• whether the reference to “prior to announcement of a transaction” in
  the definition is appropriate or whether it should be amended to
  cover also those communications of information not followed by a
  specific announcement; and
• whether the market sounding procedures could be simplified whilst
  still maintaining an adequate audit trail for the NCAs.