1. The European market abuse framework
The new Market Abuse Regulation (596/2014/EC)1(MAR) will repeal and replace the existing Market Abuse Directive (2003/6/EC) (MAD) and its implementing measures as from 3 July 2016. MAR updates and strengthens the current market abuse rules, without introducing revolutionary changes.
The European legislature opted for a regulation in order to ensure a more uniform interpretation of the market abuse rules and more clearly define the rules applicable in all Member States. In addition, MAR's direct applicability will prevent diverging national requirements and reduce regulatory complexity and compliance costs (especially for companies operating on a cross-border basis) and therefore help eliminate competition distortions.
MAR is complemented by Directive 2014/57/EU on criminal sanctions for market abuse2 (CSMAD or MAD2) which requires all Member States to provide for minimum rules on criminal offences and to impose criminal sanctions for at least the most serious cases of market abuse.
MAR will be further supplemented by technical implementing measures adopted by the Commission. To date, implementing measures have been published in the Official Journal of the European Union with regard to:
preventing, detecting and reporting abusive practices or suspicious orders or transactions;3
accepted market practices;6
the content of notifications to be submitted to competent authorities and the compilation, publication and maintenance of the list of notifications;7
the format and template for notification and public disclosure of managers' transactions;8
the reporting to the relevant competent authorities of actual or potential infringements;9
the precise format of insider lists and for updating insider lists;10
the exemption for certain third countries public bodies and central banks, the indicators of market manipulation, the disclosure thresholds, the competent authority for notifications of delays, permission for trading during closed periods and types of notifiable managers' transactions;11
and the timing, format and template of the submission of notifications to competent authorities.12
2. The Belgian market abuse framework
In Belgium (as in other Member States), most of MAR's provisions will be directly applicable as from 3 July 2016, without further national implementing measures being required. In order to prepare for the entry into force of MAR, Belgium has nevertheless taken the following steps.
- Implementation of MAR in the Belgian market abuse framework
In order to align the Belgian market abuse requirements with MAR, a bill13 was introduced to repeal or amend the Belgian statutory provisions that will become redundant after the entry into force of MAR, such as Articles 10 §1 and 25 of the Act of 2 August 2002 on the supervision of the financial system and financial services,14 which deal with the disclosure of inside information and the prohibition on insider dealing.
This bill further designates the FSMA as the competent authority to supervise compliance by companies listed on a Belgian regulated market or MTF with MAR and modifies and clarifies the FSMA's powers to impose sanctions and investigate.
The bill was adopted on 16 June 2016. Further implementing measures will however be necessary, especially with regard to criminal sanctions.
- Update and adoption of FSMA circulars
In response to the entry into force of MAR, the FSMA has published two new circulars and updated three existing ones.
The new circulars are:
FSMA Circular 2016-08 providing practical instructions with respect to notification and reporting under the market abuse rules;
FSMA Circular 2016-07 describing the MAR-related obligations of issuers listed on the Free Market (see below).
The amended circulars are:
FSMA Circular 2012-01 on the obligations of issuers listed on a regulated market;
FSMA Circular 2011-06 on the obligations of issuers listed on Alternext;
FSMA Circular 2011-07 on the acquisition of own shares or certificates by listed companies or companies whose securities are admitted to trading on certain MTFs.
Points of interest for listed companies
The new market abuse rules modify and clarify a number of existing obligations. The most important changes affecting Belgian listed companies are mentioned below.
1. Insider lists
Pursuant to MAR, issuers must establish a list of all persons who have access to inside information and who are working for them under a contract of employment or otherwise performing tasks through which they have access to inside information, such as advisors, accountants and credit rating agencies.
This obligation is not new, but the format and content of the insider list have now been harmonised. In accordance with MAR and its implementing measures, the FSMA has therefore issued a standard form to be used for compiling and updating insider lists, which can be found here.
As is the case under the current market abuse rules, MAR requires issuers to take all reasonable steps to ensure that any person on the insider list acknowledge in writing the applicable statutory and regulatory duties and be made aware of the sanctions applicable for insider dealing and the unlawful disclosure of inside information.
No "educational" letter to inform insiders is however required by the FSMA or ESMA.
2. Delayed disclosure of inside information
As is presently the case, listed companies will be entitled to delay the disclosure to the public of inside information, provided the following cumulative conditions are met:
immediate disclosure is likely to prejudice legitimate interests of the issuer;
delaying disclosure is not likely to mislead the public; and
the issuer is able to ensure the confidentiality of the information.
Under the current market abuse framework, issuers must inform the competent authority a priori of a decision to delay the disclosure of inside information. Under MAR, an issuer delaying the disclosure of inside information need inform the competent authority only immediately after the information is disclosed to the public (along with a written explanation of how the above conditions were met)
The notification should be sent to both firstname.lastname@example.org and the issuer's contact at the FSMA.
It should be noted that the scope and definition of inside information are unchanged under MAR.
3. Managers' transactions
As is the case under the current market abuse rules, MAR requires persons discharging managerial responsibilities for an issuer, as well as persons closely associated with them, to notify the issuer and the competent authority of every transaction conducted for their own account relating to the issuer's shares or debt instruments or to derivatives or other financial instruments linked thereto no later than three business days after the date of the transaction.
The practicalities for such notifications have now been clarified. Notifications must be made using an online application developed by the FSMA. Notified managers' transactions will be posted by the FSMA on its website, thus not disclosed by the issuer directly.
The FSMA will post on its website shortly a guide for using the online application.
4. Extended scope of application
The scope of MAR has been extended to include instruments traded on MTFs.
In Belgium, this extension will affect the rules applicable to issuers listed on the Free Market. Thus, the rules on administrative sanctions, the publication of inside information by issuers, the drawing up of an insider list, and the notification of transactions by persons discharging managerial responsibilities will be applicable to issuers listed on the Free Market as of 3 July 2016. Under the current framework, only criminal sanctions for market manipulation and insider trading can be imposed.
This extension will however have limited impact for issuers listed on Alternext, as the Belgian legislature already rendered the market abuse rules applicable to Alternext by means of the Royal Decree of 21 August 2008.15
5. Market soundings
MAR introduces new rules on the disclosure of inside information in the framework of market soundings in relation to capital markets transactions.
A market sounding consists of the communication of information to one or more potential investors, prior to the announcement of a capital markets transaction, in order to gauge their interest in the proposed transaction and the related conditions such as volume or pricing.
Prior to or during market soundings, issuers will now have to comply with a number of additional obligations provided for by MAR and clarified in FSMA Circular 2016/08.
For example, pursuant to MAR, the issuer must, prior to conducting a market sounding, specifically consider whether the sounding will entail the disclosure of inside information and make a written record of its conclusion and the reasons therefor.
In addition, the investment bank or stockbroker acting for the issuer must, before making the disclosure:
(a) obtain the consent of the investor involved in the market sounding to receive inside information;
(b) inform the investor that it is prohibited from using or attempting to use the inside information;
(c) inform the investor that it is obliged to keep the information confidential.
The information to be compiled and maintained by issuers conducting market soundings need be provided to the FSMA only upon request.
6. Safe harbour
MAR maintains the safe harbour for buy-back programmes and stabilisation, with a number of slight differences.
FSMA Circular 2016/08 details the applicable procedure to benefit from the safe harbour. For instance, issuers must inform the FSMA by email (email@example.com) within seven days after the transaction.