The times they are a-changing – amendments to the Market Abuse Regulation

The Market Abuse Regulation (MAR) has been in force for over 4 years now and as a Regulation is intended to enhancing market integrity and investor protection throughout the capital markets, has far reaching effects on all market participants – from first time issuers to brokers to trading venues.

Given that the behaviour which MAR seeks to regulate, and the obligations which it seeks to impose, are so broad, the MAR must continuously change and evolve with time if it is to remain relevant. It is therefore promising to note that currently, there are at least three EU-wide efforts which seek to amend (or bring about amendments) the Market Abuse Regulation: the SME Growth Market Regulation, the European Securities and Markets Authority’s (ESMA) mandate to review MAR, and a report by the High-Level Forum on the Capital Markets Union.

The SME Growth Market Regulation

SME Growth Markets are a relatively new category of multilateral trading venues (MTFs) that were introduced by the Markets in Financial Instruments Directive II in January 2018 and are specifically designed to be trading venues on which Small and Mid-sized Enterprises (SMEs) (which are a key motor of investment and job creation in the EU) can raise capital without having to face the brunt of burdensome compliance costs and regulatory barriers that arise in the context of traditional trading venues – and which may prove to be insurmountable hurdles for SMEs.  In this regard, the SME Growth Market Regulation seeks to amend the Market Abuse Regulation, as well as the Prospectus Regulation, in order to alleviate some of these costs and barriers, in the hope that SME Growth Markets become more attractive to SMEs wishing to access to the capital markets.

In this respect, by virtue of an amendment to article 18 of MAR by the SME Growth Market Regulation, issuers whose financial instruments are admitted to trading on an SME growth market need not  include all people with access to inside information in their insider list, but will be entitled to include in their insider lists only those persons who, due to the nature of their function or position within the issuer, have regular access to inside information.

Another important amendment for issuers whose financial instruments are admitted to trading on an SME Growth Market is that such issuers will no longer be required to provide the competent authority with a written explanation of their decision to delay the publication of inside information once they publish the inside information, but will only need to provide written explanations if and when they are requested to do so. Also, provided the issuer is able to justify its decision to delay, the said issuer will not be required to keep a record of that explanation.

This said, a number of the changes to MAR (which will come into force on 1 January 2021) that will be brought about by the SME Growth Market Regulation do not only affect issuers listed on SME Growth Markets but will impact all issuers. For example, one of the amendments clarifies the position (which had previously been clarified by ESMA in their Q&A on MAR) that both issuers as well as persons acting on their behalf are under an obligation to keep insider lists. Another change is in respect of the market sounding rules in MAR, whereby certain communications to qualified investors, in connection with offers made solely to qualified investors, will fall out of the scope of the market sounding regime under MAR, but will still not be deemed to be an unlawful disclosure of inside information.

With respect to the notifications which persons discharging managerial responsibilities (PDMR) in an issuer (or persons closely associated to them) must submit to the issuer and the competent authority, by virtue of one of the amendments to MAR brought about by the SME Growth Market Regulation, issuers will now be given some breathing space since they will no longer be under an obligation to publish PDMR notifications within 3 days from the date of the transaction, but will need to publish the information within 2 days from the day on which they receive the information.

It is important to note that (as mandated under the SME Growth Market Regulation) ESMA is in the process of drafting regulatory technical standards and implementing technical standards on liquidity contracts and insider lists, respectively, and has, on 6 May 2020, issued a consultation paper to this effect.

2. ESMA’s mandate to review MAR

Article 38 of MAR requires the European Commission to present a report to the European Parliament and the European Council to assess various provisions of MAR and the European Commission has therefore mandated ESMA to provide it with technical advice on the report which it (the Commission) needs to submit to Parliament and Council. In this connection, on 3 October 2019, ESMA issued a consultation document on the MAR review report, the purpose of which is to consult market participants on several MAR–related matters and to propose possible amendments to MAR.

In this regard, ESMA consulted inter alia on: the definition of inside information in connection with commodity derivatives and front running; the rules regarding the delay of disclosure of inside information; a proposition to extend the obligation to draw up and maintain insider lists to other persons performing tasks through which they have access to inside information, even if they do not act on behalf or on the account of the issuer; a proposition on the inclusion of a requirement in MAR for issuers to have systems and controls for identifying, handling, and disclosing inside information; certain amendments to the market sounding regime; an increase to the minimum thresholds for PDMR notifications; the possibility of treating collective investment undertakings differently than other issuers.

An important point which ESMA raised for consultation regards MAR’s most central theme – the definition of ‘inside information’. Specifically, ESMA put the question whether the definition of inside information is sufficient to cover all information relevant for competent authorities to effectively combat market abuse. In this regard, ESMA asked whether market participants experience any difficulties in identifying what information constitutes inside information and the moment in which information becomes inside information under the current MAR definition.

As anyone who deals with the Market Abuse Regulation will immediately point out, the definition of inside information is perhaps one of the greatest sticking points of the Regulation. One author defines the definition of inside information under MAR as the “short blanket problem” – either your toes or your nose must freeze. Either inside information is defined to include uncertain information, which would assist competent authorities enforce the ban on insider dealing but will be detrimental to the disclosure obligation, or inside information only includes certain (or near‐certain) information, which would have the opposite effect. ESMA’s consultation on the appropriateness of the definition of inside information is therefore most certainly welcome, and one hopes that this consultation document will lead to legislative efforts to clarify the definition which is of fundamental importance to the proper implementation of MAR.

Following the consultation paper, ESMA will need to submit a final report on its review of MAR to the European Commission. Curiously, the deadline for the final report was set at Spring 2020, though, to the author’s knowledge, the final report has not yet been published.

3. Final report of the high-level forum on the Capital Markets Union

The third effort which is proposing amendments to MAR is a report by the high-level forum on the Capital Markets Union (HLF). The HLF comprises a group of experts from a wide spectrum of professional and national backgrounds tasked with developing new ideas on the future of Capital Markets Union policies, and, in its final report (published in June 2020) the HLF made a number of recommendations for the improvement of European capital markets, chief among which are recommendations on amendments to the Market Abuse Regulation.

The primary recommendations in this regard are several alleviations to MAR, which alleviations will benefit all issuers. For example, the HLF recommends that issuers should be given more flexibility to avoid making premature disclosures of inside information in instances where information needs to be disclosed under both the Transparency Directive and MAR. The HLF also proposed a reduction in the amount of information to be included in insider lists, thereby reducing the regulatory burden faced by issuers when compiling such lists. The HLF is also of the view that the current €5,000 threshold which triggers the requirement for PDMR notifications to be filed is too low and should be raised to €20,000 – €50,000.

The HLF also understands the inadequacy of the current definition of ‘inside information’. In an attempt to reduce compliance costs as a result of its broad definition – which not only triggers an insider trading prohibition, but also triggers an immediate disclosure obligation – the HLF suggests that the definition of ‘inside information’ under MAR should be narrowed down in a manner that improves legal certainty about what constitutes inside information and related to it market abuse, while reducing unnecessary disclosure.

In this regard, the HLF recommended that the European Commission should review the Market Abuse Regulation in order to (i) introduce a safe harbour in the case of distribution of preliminary inside information, (ii) give ESMA a clear mandate to define preliminary information, as well as (iii) refine the definition of inside information with a significant price effect.

Finally, the HLF recommends that its proposed changes to MAR should be included in the upcoming MAR review (which review was discussed above).


It is evident that a behemoth of a law such as the Market Abuse Regulation cannot be without its imperfections. There are, and will always be, aspects of the law which, for some reason or other, fall short of achieving their desired outcomes – not least because the law seeks to regulate an industry that is highly technical and ever evolving. On this note, it is heartening to note the EU-wide effort being made to amend and improve the Market Abuse Regulation. It is particularly encouraging to note that certain points which are the cause of regular headaches, such as the definition of inside information, and the burden of keeping insider lists. are on the radar – and it is hoped that these efforts, as well as others that may be in the pipeline, lead to an improved law which ultimately brings about better and fairer capital markets.

The author would like to thank Giannella Vella, student intern at Ganado Advocates, for her invaluable help in drafting this article.

This article was first published in the Times of Malta, 19 August 2020