The EU Market Abuse Regulation (MAR) will automatically become law in Ireland in July 2016 without any requirement for domestic implementing legislation. MAR will introduce a more expansive and prescriptive regime replacing the 2003 EU Market Abuse Directive (“MAD”) which created an EU-wide framework prohibiting insider dealing and other forms of “market manipulation”.
MAD has been under review since 2009 from both an administrative burden perspective and in light of market shortcomings identified during the financial crisis. MAR is designed to capture new markets and financial instruments, as well as practices such as automated trading methods and commodities and derivatives trading (e.g. emissions). It also aims to create greater consistency in the enforcement of market abuse law across the member states and to reduce compliance costs. Whether this will actually be the case remains to be seen. In direct response to the LIBOR-rigging scandal of 2012, MAR also includes provisions relating specifically to the calculation of benchmarks.
ESMA (the European Securities and Markets Authority) published Consultation Papers in July 2014 containing draft Technical Advice and Technical Standards for the implementation of MAR. The Technical Advice details indicators of market manipulation and standards for delaying public disclosure of inside information, while the Technical Standards contain revised content and format requirements for insider lists and director/PDMR dealing notifications. In addition there are new rules around “market soundings” to gauge investor interest prior to the announcement of a transaction and maintaining records of these, as well as conditions for and disclosure of buy-back programmes and stabilisation measures.
A number of market participants and industry bodies, for example the Company Law Committee of the City of London Law Society, have expressed concerns that the draft Standards in particular are disproportionately and impractically burdensome and will prove more costly.
ESMA conducted an open hearing on the draft Standards and Advice on 8 October 2014 and, on 3 February 2015, ESMA published its final Technical Advice. The Commission will consider this Advice when drafting the MAR implementing standards later this year. ESMA will deliver the final Standards in July 2015 and it remains to be seen what the outcome of the submissions and consultations will be but so far ESMA has shown little appetite for reconsidering its position. On that basis, issuers of financial instruments and investment firms should begin to review their business structures and systems to be compliance-ready for July 2016.
Practical implications include:
- Insider lists will need to be considerably more detailed – home address, personal phone number and email address, PPS number, date and time of access to inside information.
- Investment firms will be required to record telephone calls and competent authorities will have the power to request existing telephone recordings and data traffic records, not just from the investment firms but also from data traffic records held by telecoms operators.
- Companies will need to post and maintain on their websites for at least 5 years all information they are required to publicly disclose.
- Where a company delays the disclosure of inside information to protect its legitimate interests, it may be obliged to provide a written explanation to the competent authority. (Member States can provide that explanations are only required where requested by the competent authority.)
- A person who deals while in possession of inside information will be presumed to have “used” that information in the transaction.
- Attempted market manipulation or attempted insider dealing is expressly prohibited – i.e. a trade does not actually have to be placed or an order executed.