Blog 7th Jul 2014

Criminal sanctions for market abuse to be expanded

The current Market Abuse Directive (“MAD”) is to be replaced in July 2016 by the EU Market Abuse Regulation (“MAR”) and the Criminal Sanctions for Market Abuse Directive (“CSMAD”). Together they will expand the scope of regulation of core areas, such as market manipulation and insider information, by extending coverage in terms of Markets and products as well as introducing new procedural rules. The European Securities and Markets Authority (“ESMA”) are to outline new technical standards of compliance for approval by the EU Commission. Companies whose shares are admitted to trading will soon need to start planning in advance.

The market abuse offences will be similar to those presently in place. They are to include attempted as well as actual market manipulation; thus proof of successful execution shall no longer be necessary. How companies will be able to put into place arrangements to report unsuccessful or suspicious transactions remains to be seen. Accepted Market Practices (“AMP’s”) will need to be agreed by ESMA thereby removing the present discretion retained by competent authorities to allow acts which would otherwise be regarded as market abuse. A single Market Abuse rule book is to be introduced across the EU rationalising national variations. Insider lists are to be harmonised. A new set of procedures for market soundings is to operate. There are some alterations to the language of the definition of “inside information” and key changes to public disclosure requirements of issuers. A new and more detailed notification process relating to disclosure of manager’s transactions shall apply. Enforcement powers, already enjoyed in the UK by the FCA, are to be further strengthened.

For the moment, there is little to do for market participants other than to respond, if they wish, to ESMA’s Consultation Paper on implementing and regulatory standards. However, in early 2015 EU traded companies will need to consider planning a timetable and compliance checklist in advance of the new regime’s start date of 3 July 2016.

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