EUROPEAN UNION: ESMA publishes updated Q&A on Market Abuse Directive

Wednesday November 2 2016

As part of ESMA’s role in promoting common supervisory approaches it develops Q&As to elaborate on the provisions of certain EU legislation and guidelines.

ESMA has included 5 new questions in their updated Questions and Answers on the Market Abuse Regulation (MAR). These clarify the following:

• When transactions carried out under Article 19(1) of MAR are in a currency which is not EUR, the exchange rate to be used to determine if the threshold is reached is the official daily spot foreign exchange rate which is applicable at the end of the business day when the transaction is conducted;
• Any communication that meets the criteria of the definition of “investment recommendation” within the meaning of Article 3(1)(35) of MAR in conjunction with Article 3(1)(34) of MAR will be deemed to fall within the scope of the investment recommendation regime. As such, whether a specific oral or electronic communication, or a communication labelled as “morning notes” or “sales notes”, may be considered an investment recommendation within the meaning of MAR, should be established on a case-by-case basis. Where a standardised communication, including oral or electronic communication, is structured and pre-planned for distribution channels and it implicitly or explicitly suggests an investment strategy in relation to a financial instrument or issuer, it should be regarded as an “investment recommendation”.
• Article 3(1)(35) of MAR sets out that “investment recommendation” means “information recommending or suggesting an investment strategy, explicitly or implicitly, concerning one or several financial instruments or the issuers [emphasis added], including any opinion as to the present or future value or price of such instruments, intended for distribution channels or for the public”. Therefore, a communication that does not refer to either a financial instrument or an issuer, should generally not be considered an investment recommendation.
• With regard to an investment firm, any information that comprises direct or indirect investment proposals in respect of a financial instrument or an issuer will be considered as information recommending or suggesting an investment strategy as defined under point (i) of Article 3(1)(34) of MAR. This is regardless of whether the production of investment recommendations is the main business of the investment firm.
• Material which concerns one or several financial instruments admitted to trading on a regulated market or a multilateral trading facility or for which a request for admission to trading on such a market has been made, or, traded on a multilateral trading facility or an organised trading facility, is considered as information implicitly recommending or suggesting an investment strategy, insofar as it contains a valuation statement as to the price of the concerned financial instruments.

Background

In June 2014 new European legislation seeking to strengthen the fight against market abuse was agreed. At an EU level, concerns of market distortion arising through regulatory arbitrage led to the introduction of The Market Abuse Regulation (MAR), which will have direct effect in all EU Member States from 3 July 2016.

Key MAR requirements include:

Issuers must inform their competent authority if they have delayed the disclosure of inside information and to explain why such delay was consistent with MAR;

A new offence of ‘attempted market manipulation’;

Introduction of specified procedures for issuers to follow when conducting market soundings; and

The scope of the EU Market Abuse regime is extended beyond regulated markets to financial instruments traded on multilateral trading facilities (MTFs) or other organised trading facilities (OTFs) and certain OTC activities, including derivatives and credit default swaps.

Please click on the link above for further details.