Key changes introduced by the EU Listing Act

Regulation (EU) N° 2024/2809 of 23 October 2024 (the “Listing Act”) has amended several Regulations in force, such as Regulation (EU) N° 596/2014 of 16 April 2014 (“MAR”). Most of the provisions of the Listing Act, including the provisions set out below in this newsletter, have been in force since 4 December 2024. This newsletter will focus only on the amendments made by the Listing Act to MAR.

These changes affect, among other things, buy-back programmes (A), the handling of inside information (B), managers’ (i.e. persons discharging managerial responsibilities, or “PDMR”) transactions (C) and the sanctions regime under MAR (D).

• Buy-back programmes: a simplified reporting

Article 5, Paragraph 3 or MAR provides that an issuer seeking for the ‘safe harbour’ exemption in connection with its buy-back programme shall now report all transactions relating to such buy-back programme to the competent authority of the most relevant market in terms of liquidity.

Such competent authority shall, upon request, forward the information to the competent authorities of the trading venue on which the shares are traded. Such reported trades shall be subsequently disclosed to the public in an aggregate form.

Through the above two measures, the European legislator sought to simplify the reporting procedure. The disclosure in aggregate form implies that the information ought to contain the aggregated volume and the weighted average price per day and per trading venue.

• Amendments to the regime of public disclosure of inside information

1. Exemption to the public disclosure requirement: no disclosure of intermediate steps

The new redaction of the Article 17 of MAR provides that the issuer is not required to disclose inside information to the public relating to that issuer if such inside information relates to intermediate steps in a protracted process where those steps are connected with bringing about or resulting in particular circumstances or a particular event. In such case, only the final event or final circumstance shall be disclosed publicly.

Information disclosed at a very early stage may mislead the public, hence the amendment made by the European legislator. By only requiring the disclosure of the final event or final circumstance of a protracted process, the legislator sought to address the potential issue caused by the disclosure of mere intentions or ongoing negotiations. For example, the Listing Act specifies that in case of a merger, the relevant disclosure should be made as soon as possible after the management has taken the decision to sign off on the relevant merger agreement.

This idea was already partially in the previous version of Article 17 of MAR but the latter did not provide for such a clear rule and course of action, thus leaving at the time more uncertainty for market participants. In addition, it was subject to the satisfaction of certain criteria. This uncertainty and these criteria have now been removed and in that respect this is a helpful step forward. The Listing Act also provides that the European Commission shall adopt a delegated act to give some further guidance (by way of a non-exhaustive list) as to what is meant by final events or final circumstances in such protracted process.

2. Amendment to the rule allowing the issuer to delay the disclosure of inside information

An issuer or an emission allowance market participant may delay disclosure of inside information if certain conditions are met. To that end, three cumulative conditions have to be fulfilled. Two conditions remain identical to those pre Listing Act, i.e. (x) the immediate disclosure is likely to prejudice the legitimate interest of the issuer (or the emission allowance market participant) and (y) the issuer (or the emission allowance market participant) delaying the disclosure is able to ensure the confidentiality of such information. One of the three conditions has been significantly amended as follows: pre Listing Act, the delay of disclosure should not be likely to mislead the public; which left a certain degree of interpretation to market participants. Post Listing Act, the inside information subject to such delay of disclosure should not be in contrast with the latest public announcement on the same matter to which the inside information refers. Again, this amendment is in our view helpful in that it is more precise as to what is expected from market participants in order to apply this rule.

• New thresholds and authorised transactions regarding PDMRs

1. Modifications of thresholds regarding transactions to be disclosed by PDMRs

Paragraphs 8 and 9 of Article 19 of MAR now provide for a threshold of EUR 20,000 (against EUR 5,000 before enforcement of the Listing Act) regarding transactions to be disclosed by PDMRs to the issuer or the emission allowance market participant and the relevant market authority. A competent authority can now decide to increase such threshold to EUR 50,000 or decrease if to EUR 10,000 (against the sole possibility to increase the threshold from EUR 5,000 to EUR 20,000 before enforcement of the Listing Act).

2. New authorised transactions for PDMRs

Paragraph 12a. of Article 19 of MAR was also added, now providing for a wider range of authorised transactions by an issuer to a PDMR during closed periods.

In that respect, a PDMR can be authorised by an issuer to trade or make transactions on its own account or for the account of a third party during a 30 days closed period if such transactions or trade activities do not relate to active investment decisions undertaken by the PDMR, or if such transactions or trade activities result exclusively form external factors or actions of third parties, or is such transactions or trade activities, including the exercise of derivatives, are based on predetermined terms.

Indeed, the European legislator specified that transactions or activities by PDMRs which do not depend on a deliberate investment activity ought to be outside the scope of the prohibition. In other words, the prohibition should not apply to transactions or activities which depend exclusively on external factors or do not imply an active investment decision from the relevant PDMR. The Listing Act (in its preamble) provides for a number of examples, among which transactions resulting from a discretionary portfolio management mandate, the acceptance of donations, the exercise of options, forward contracts or other derivatives contracts entered into outside the closed period. While these indications are very helpful, one should probably apply them with caution when referring to the exercise of options (or other rights under a derivative contract) by PDMRs, since the Listing Act provides that no active decision ought to be taken by a PDMR during a closed period.

• Heavier potential sanctions under MAR

Paragraph 2(j) of Article 30 of MAR has been amended and now provides for a potentially heavier set of sanctions towards legal persons in the event of a breach of MAR requirements, which are intended to be more dissuasive.

Infringements of Articles 18 (Insider list), 19 (Managers’ transaction) and 20 (Investment recommendations and statistics) of MAR were previously sanctioned by a pecuniary sanction of EUR1,000,000. In addition to this pecuniary sanction of EUR1,000,000 (which regime has been slightly amended), the Listing Act has added a pecuniary sanction of 0.8% of the relevant legal person’s annual turnover. Apart from this amendment, the MAR sanctions regime remains quasi-unchanged.