On 3 February 2015, the European Securities and Markets Authority (ESMA) published its final report outlining its technical advice on the implementation of the Market Abuse Regulation (MAR). Click here to view the report.
The Commission had mandated ESMA to assist it on producing content for the delegated acts required by certain provisions of MAR. ESMA's final report follows its consultation paper on its draft technical advice published on 15 July 2014.
In general, the report:
- specifies the indicators of market manipulation and examples of manipulative practices
- recommends minimum thresholds for the purpose of the exemption for certain participants in the emission allowance market from the requirement to publicly disclose inside information
- suggests how competent authorities should determine how and when public disclosures of inside information can be delayed and to which regulators those delays must be notified
- clarifies which managers' transactions should be disclosed, and
- proposes the procedures and arrangements regarding the reporting of infringements of the MAR regime.
A look at managers' transactions
One of the key areas affecting listed companies is the new regime on notifying and disclosing managers' transactions. The final report clarifies the types of managers' transactions that must be notified and disclosed and the triggers for those disclosures. The obligation to notify and disclose managers' transactions was included in the old regime under the Market Abuse Directive, but the scope has been modified by MAR.
What is the general requirement under MAR?
Pursuant to MAR, persons discharging managerial responsibilities (PDMRs) and persons closely associated with them should notify the issuer and competent authority of every transaction conducted on their own account relating to the shares or debt instruments of that issuer. The issuer is responsible for ensuring that the information is made public, unless national law provides that the competent authority must publicise the information.
Once the transactions executed by a PDMR or a closely associated person within a calendar year cumulatively amount to €5,000 (or €20,000 if a competent authority has decided to increase this threshold in accordance with MAR), every subsequent transaction should be notified regardless of its amount.
We set out below some key points to note regarding managers' transactions in ESMA's final report:
Trading during a closed period
MAR includes restrictions on dealings by PDMRs during closed periods (similar to the current rules in the Listing Rule's Model Code) and notification obligations relating to PDMR dealings (similar to the current requirements in DTR 3). In its final report, ESMA provides technical advice on the types of transactions triggering the notification and disclosure duties and whether any transactions during a closed period are permitted.
MAR provides that a closed period lasts for 30 days before an annual or interim report is to be disclosed by the issuer "according to the rules of the trading venue where the issuer's shares are admitted to trading or according to national law". However, respondents to ESMA's July 2014 consultation noted that it is market practice in the UK for issuers to publish a preliminary announcement of annual results (containing information prescribed by the FCA's Listing Rules) before publishing the year-end report. In some cases, where the preliminary announcement contains inside information, the issuer is obliged to make the preliminary announcement before the year-end report is published (as there may not be sufficient time to prepare the year-end report for publication). Pursuant to the Model Code, the preliminary announcement triggers the end of the closed period as once the inside information has been published, there is no need to need to prohibit dealings. However, despite acknowledging in its final report that such a practice is also common in other markets, ESMA has clarified that preliminary announcements will not end a closed period (unless the Listing Rules are amended to require issuers to make preliminary announcements – at present, listed issuers may make them voluntarily). It will be interesting to see how the FCA approaches this issue when implementing the new MAR regime.
Excluded transactions under Model Code – now within scope
There are certain transactions which are currently excluded from the scope of the Model Code but which will be caught by the new restrictions under MAR. Respondents to the consultation had pushed for the excluded transactions under MAR to be based on those transactions excluded in the UK's Model Code but this has not been reflected in the final report. Transactions which are not excluded under the MAR regime include the taking up of entitlements under a rights issue, the undertaking to accept, or the acceptance of, a takeover offer, or the receipt of a gift or donation.
ESMA has sent its technical advice to the European Commission for consideration. ESMA’s regulatory technical standards regarding MAR are expected to be delivered in July 2015.
The delegated acts should be adopted by the Commission so that they enter into force by July 2016, the same date by which MAR must be implemented in member states (although this is subject to the rights of the European Parliament and Council to object and propose revisions to a delegated act).