EU Securities Authority Recommends Changes to EU Market Abuse Regulation

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Shearman & Sterling LLPThe European Securities and Markets Authority has published a final report on the review of the Market Abuse Regulation.

MAR requires the European Commission to report on certain aspects of the operation of MAR, including where appropriate, making recommendations for legislative change. ESMA's final report and recommendations will support the work by the Commission on producing that report. The proposals will mostly affect issuers of financial instruments admitted to trading or trading on a trading venue, investment firms and asset management firms.

In its final report ESMA makes several recommendations, including:

  1. That further consideration be given to how the provisions of the Benchmark Regulation interact with MAR provisions and to establishing new powers for national regulators to impose administrative sanctions for breach of MAR on benchmark administrators and supervised contributors, such as withdrawal of authorization and prohibiting senior managers from exercising managerial functions.
  2. For issuers making use of the exemption for buy-back programs, proposing that MAR should be amended so that an issuer would only need to report information on buy-back program transactions to the national regulator of the trading venue that is most relevant in terms of liquidity of the shares. The information would need to cover all buy-back program transactions on all trading venues. To facilitate this, investment firms would need to provide the issuer with the name of the relevant national regulator. ESMA is also recommending that the information reported to a regulator be reduced to that which is relevant for the purpose.
  3. Amending the definition of inside information to also cover the information on orders conveyed by persons other than clients, including managers of a proprietary account or a fund. No other recommendations are made on the definition, but ESMA commits to providing further guidance on the application of the definition, delays to disclosure of inside information and pre-hedging.
  4. Clarifying that when the market sounding requirements are met by a disclosing market participant, that they are protected from being charged with unlawful disclosure of inside information and clarifying the position regarding market soundings where inside information is passed and those where it is not.
  5. Introducing administrative sanctions for failing to meet the market sounding requirements.
  6. Clarifying the obligations on issuers for maintaining insider lists.
  7. Excluding self-managed collective investment undertakings from the obligations in the regime for "persons discharging managerial responsibilities" (PDMRs).
  8. Removing the legal limitations for national regulators to exchange information obtained through intra-EU cooperation and information exchange mechanisms with tax authorities. ESMA does not recommend amending MAR to expand the remit of national securities regulators to investigate and sanction unfair behaviours carried out by regulated entities, beyond insider dealing and market manipulation. ESMA published a full report on the issue of dividend arbitrage schemes alongside its MAR Review Report.

ESMA also analyzed whether the scope of MAR should be extended to include Spot FX contracts. ESMA refrains from making any recommendations on this point, stating that further work is needed, in particular in view of the current revisions being made to the Global FX Code and to ensure engagement with global stakeholders.

View ESMA's final MAR Review Report.

View ESMA's final report on withholding tax reclaim schemes.

[View source.]

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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