On 3 July 2016 the Regulation (EU) No 596/2014 of the European Parliament and of the Council of 16 April 2014 on market abuse (the “MAR”) has entered into force.
The below overview summarizes the main changes linked to the entry into force of the MAR, notably for issuers as well as persons discharging managerial responsibilities within an issuer (the “PDMR”) and persons closely associated with them (the “PCA”) within managers’ transactions. As Luxembourg is well-known for the Euro MTF market (the “Euro MTF”) operated by the Luxembourg stock exchange (the “Luxembourg Stock Exchange”), we will only refer to the consequences of the MAR for debt securities admitted to trading on the Euro MTF.
1 Scope of the market abuse regime
The general approach of the MAR is to establish a common framework on insider dealing, unlawful disclosure of inside information and market manipulation and also measures to prevent market abuse in order to ensure the integrity of financial markets in the European Union as well as to enhance investor protection and confidence in those markets.
Before the entry into force of the MAR on 3 July 2016, it was applying to regulated markets only. The main change demonstrates now the extension also to multilateral trading facilities (the “MTF”) (i.e. the Euro MTF of the Luxembourg Stock Exchange).
2 Disclosure requirements
(a) Public disclosure of inside information
According to Article 17 of the MAR issuers shall inform the public as soon as possible of inside information which directly concerns that issuer.
Before the entry into force of the MAR, the obligation to publish any inside information was not covered as such by the market abuse law, but by the rules and regulations of the Luxembourg Stock Exchange (the “Rules and Regulations”). It was foreseen that issuers with its shares and debt securities admitted to trading on the Euro MTF were obliged to promptly publish information on any major new developments relating to its activities and which could have influenced the price of the shares. Now, such disclosure obligation is clearly encompassed by the MAR and applicable in relation to the regulated market as well as the MTF and OTF. In answer to such entry into force of the MAR, the Luxembourg Stock Exchange has deleted Articles 1001(i) and 1004(i) of its Rules and Regulations.
(b) Insider lists
Article 18 of the MAR states a further additional disclosure obligation for issuers who have requested or approved admission of their financial instruments to trading on a regulated market or the MTF or any person acting on their behalf or account by requiring them to maintain its own insider list. This means, any person who has access to inside information and who is working for the issuers under an employment agreement or performing otherwise tasks through which they get access to inside information, have to be placed on such a list that itself shall be kept up-to-date.
The insider list shall include at least:
- the identity of any person having access to inside information;
- the reason for including that person in the insider list;
- the date and time at which that person obtained access to inside information;
- the date on which the insider list was drawn up.
The insider list shall be promptly updated by the issuers or any person acting on their behalf or account, including the date of the update, in the following circumstances:
- where there is a change in the reason for including a person already on the insider list;
- where there is a new person who has access to inside information and needs to be added to the insider list; and
- where a person ceases to have access to inside information.
- The issuers or any person acting on their behalf or account shall retain the insider list for a period of at least five years after it is drawn up or updated.
(c) Manager’s transactions
Article 19 of the MAR sets out a transactions notification requirement for PDMR and PCA in order to improve the financial markets’ transparency. Therefore, PDMR and PCA should notify the issuer or the emission allowance market participant (the “EAMP”) and the Supervision Commission of the Financial Sector (the “CSSF”) (i) in respect of the issuers, of every transaction conducted on their own account in relation to the shares or debt instruments of that issuer or to derivatives or other financial instruments linked thereto and (ii) in respect of the EAMP relating to emission allowances, to auction products based thereon or to derivatives relating thereto.
The issuer itself is responsible to ensure that the information is made public, unless national law provides that the competent authority itself makes the information public.
The Commission Delegated Regulation (EU) 2016/522 of 17 December 2015 (the “Delegated Regulation”) provides a non-exhaustive list of particular types of transactions that should be notified, for example: acquisitions, assignment, short selling, subscription or exchange. The pledging, borrowing or lending of bonds or derivatives or other financial instruments that are associated is also covered.
Article 10 of the Delegated Regulation foresees that according to Article 19 of the MAR and in addition to the transactions pursuant to Article 17 of the MAR, PDMR and PCA, shall notify their transactions to the issuer and the CSSF.
The notification to the CSSF has to be made based on a form (in English or in French) that has been made available on its website and to be sent to the following address: market.abuse(at)cssf.lu.
The following information shall be contained in a notification of transactions:
- the name of the person;
- the reason of the notification;
- the name of the relevant issuer or EAMP;
- a description and the identifier of the financial instrument;
- the nature of the transaction;
- the date and place of the transaction;
- the price and volume of the transaction.
With regard to the above, transactions to be notified shall also include:
- the pledging or lending of financial instrument by or on behalf of a PDMR or PCA;
- transactions undertaken by persons professionally arranging or executing transactions or y another person on behalf of a PDMR or PCA, including where discretion is exercised;
- transactions made under a life insurance policy.
The notifications shall be made promptly and no later than three business days after the date of the transaction once the total amount of the transactions has reached the threshold of EUR 5,000 within a calendar year.
It should be noted that a PDMR shall not conduct any transactions on its own account or for the account of a third party, directly or indirectly, relating to the debt instruments of the issuer or to derivatives or other financial instruments linked to them during a closed period of 30 calendar days before the announcement of an interim financial report or a year-end report which the issuer is obliged to make public according to (i) the rules of the trading venue where the issuer’s shares are admitted to trading, or (ii) the national law.
The entry into force of the MAR brought important changes such as, among others, the extension of the scope of the market abuse regime and further disclosure requirements for the issuers. Furthermore, manager’s transactions have been addressed and therein the relevant PDMR and PCA.