The Market Abuse Regulation (MAR) enters directly into force on 3 July 2016, replacing and repealing the existing framework under the Market Abuse Directive (MAD). The new MAR regime aims to introduce a single market abuse rulebook across EU member states, allowing less scope for national discretion than under the existing MAD rules. The new framework seeks to enhance confidence in the integrity of European markets and in so doing it is hoped to reduce regulatory and administrative costs, especially for firms operating on a cross-border basis.

The key changes to be introduced by MAR include:

  • Significant expansion of scope to not only include financial instruments traded on ‘regulated markets’, but also instruments traded over the counter (OTCs) and on organised and multilateral trading facilities (OTFs and MTFs)
  • Introduction of offences of 'attempted' insider dealing and market manipulation, including the requirement to report suspicious orders or transactions, even if orders are not executed
  • Explicit prohibition on manipulating the calculation of benchmarks
  • A broader definition of ‘inside information’, which includes information that a reasonable investor would be likely to use in making investment decisions
  • Greater requirements on issuers and their advisors to maintain insider lists in the forms prescribed by ESMA
  • Obligation to explain to competent authorities the reasons for any delay in the disclosure of inside information
  • Greater disclosure obligations for dealings in the issuer’s securities by persons discharging managerial responsibilities
  • Prescriptive procedures to be followed when disclosing inside information for market soundings purposes

Further, the Directive for Criminal Sanctions for Insider Dealing and Market Manipulation (CSMAD) also becomes effective on 3 July 2016.  CSMAD is designed to complement, and ensure the effective implementation of MAR, by giving competent authorities increased investigative and sanctioning powers, including the imposition of criminal sanctions.

Once adopted by the European Commission, ESMA’s technical advice and standards will set out much of the detail of the new MAR regime. Such advice and standards should assist companies in preparing for their obligations under MAR, particularly in relation to amending internal policies, maintaining insider lists, preparing its share dealing code, and updating training practices.