Market Abuse Regulation (MAR): Ensuring Fair and Transparent Markets

Market Abuse Regulation (MAR) represents a comprehensive framework established by the European Union to prevent inter alia market manipulation, insider dealing, and unlawful disclosure of inside information. MAR came into force in 2016 and transposed into national law in Luxembourg by the law of 23 December 2016 on market abuse. Its main goal is to maintain the integrity of financial markets and bolster investor confidence by enforcing strict compliance standards and severe penalties for violations.

MAR’s key components are the following:

  1. Insider Dealing: the use of inside information by a person with the aim of acquiring, disposing of or cancelling a financial instrument.
  2. Market Manipulation: it encompasses a broad range of acts and forbidden practices that result in the distortion of market performance.
  3. Unlawful Disclosure: takes place when a legal or natural person possesses inside information and discloses that information to any other person, except where it is made in the normal exercise of employment, profession or duty.
  4. Market Soundings: comprises the communication of information, prior to the announcement of a transaction, in order to gauge the interest of potential investors in a possible transaction and the conditions relating to it such as its potential size or pricing.
  5. Managers’ Transactions: transactions conducted on the own account of a person discharging managerial responsibilities or person closely associated with them, relating to the shares or debt instruments of an issuer, or to derivatives, or other financial instruments linked thereto.
  6. Investment recommendations: refers to any 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.
  7. Insider Lists: consists of a list of persons who have access to inside information and who are working with them under a contract of employment or otherwise performing tasks through which they have access to inside information (e.g., advisers, accountants, credit rating agencies).

Who is concerned?

MAR does not refer to individuals or companies, but it applies to any transaction, order or behaviour concerning any financial instrument admitted to trading on a regulated market, MTF or OTF, or for which the request for admission has been made. Hence, if you identify yourself or your organization carrying out any of these activities, then it is likely that you fall within the scope of MAR.

Business Challenges and Compliance Requirements

Financial institutions, market operators, investment firms, issuers and other professionals engaging in financial activities shall consistently confirm the applicability and ensure compliance with the requirements provided by the MAR.  Non-compliance with the MAR requirements may result in significant pecuniary and administrative sanctions to both individuals and legal persons imposed by the competent authority in Luxembourg (i.e., the CSSF).