Insights

The European Securities and Markets Authority (ESMA) has just published its Final Report on the Market Abuse Regulation Review Report. This Final Report is the last step in ESMA’s mandate to draw up technical advice for the European Commission for it (the Commission) to satisfy its obligation to present an assessment of various provisions of the Market Abuse Regulation (MAR) to the European Parliament and the Council.

The Final Report covers three main topics:

1. Topics originally included in article 38 of MAR i.e. topics which the European Commission is obliged to assess in its report to the European Parliament and the Council. These topics include, inter alia, the appropriateness of introducing common rules on the need for all Member States to provide for administrative sanctions for insider dealing and market manipulation; the definition of inside information; the appropriateness of the trading prohibition for persons discharging managerial responsibilities (PDMRs) and the appropriateness on the level of certain thresholds for the notification of PDMR transactions to name a few.
2. A set of other topics not originally covered in article 38 of MAR but which are connected thereto, including buy-back programmes, the delayed disclosure of inside information, the usefulness of insider lists; different aspects of PDMR notification requirements; and cross-border enforcement of sanctions.
3. Other topics raised by ESMA itself.

In the Final Report, ESMA makes several recommendations for updates to MAR. For example, ESMA is proposing that MAR should be amended to permit an issuer to include only the details of one natural person for each legal person acting on the issuer’s behalf or on its account having access to inside information and each one of those legal persons should include in their own insiders list the natural persons or one contact of a natural person for legal persons accessing that piece of inside information working for them under a contract of employment or under any other type of arrangement in the same terms (i.e. they can include one contact person per external provider). This said, ESMA also proposed to leave certain provisions unchanged. For example, ESMA has confirmed that it will not be recommending a change to the definition of “inside information” since, it argued, that (a) the definition of “inside information” lies at the heart of the market abuse regime and on it depend further requirements within MAR and any changes to the definition would risk increasing, rather than reducing, legal uncertainty; and (b) in light of the connections between the definition of “inside information” and the other obligations under MAR, unintended consequences could derive from its amendments and any change to the definition would need to be carefully assessed and tested.

In this respect, however, ESMA confirmed that it is ready to issue guidance on the definition of inside information under MAR. As a first step, ESMA considers that guidance on specific scenarios (for instance, financial reporting) may provide a better assistance to issuers, as it could enhance clarity on concrete and recurring issues they face. Naturally, we eagerly await the publication of such guidance.

As alluded to above, the Final Report will now be submitted to the European Commission, for it to eventually submit its report to the European Parliament and the Council. It can therefore be stated that the Final Report will be the foundation on which future amendments to MAR will be based. Market participants are therefore encouraged to get familiar with the contents of the Final Report and ESMA’s recommendations in order to assess whether any of the proposed amendments will affect their existing operations, policies and procedures. In so doing, market participants can make all the necessary changes to their operations, policies and procedures well in advance of any amendments to MAR, thereby ensuring continuity and avoiding unnecessary hiccups in the future.

For more background on the Final Report, and other legislative efforts being made to update MAR, please click here .