The Market Abuse framework is intended to guarantee the integrity of European financial markets and increase investor confidence. The concept of market abuse typically consists of insider dealing, unlawful disclosure of inside information and market manipulation.
With a view to establishing a uniform framework to preserve market integrity and in order to avoid potential regulatory arbitrage, providing legal certainty and less regulatory complexity for market participants, Regulation No 596/2014 on market abuse (MAR) was adopted. Together with Directive 2014/57/EU on criminal sanctions for market abuse (CS MAD), MAR applies as of 3 July 2016.
MAR repealed Directive MAD and Commission Directives 2003/124/EC, 2003/125/EC and 2004/72/EC.
MAR aims at enhancing market integrity and investor protection. To this end, MAR updates and strengthens the existing MAD framework by extending its scope to new markets and trading strategies and by introducing new requirements.
MAR does not limit its scope of application to financial instruments admitted to trading on a regulated market or for which a request for admission to trading on a regulated market (RM) has been made. MAR also covers financial instruments traded on Multilateral Trading Facilities (MTF), financial instruments traded on Organised Trading Facility (OTF), emission allowances and any other financial instruments the price of which depends on or has an effect on the price of an instrument traded in a RM, MTF or OTF.
However, some exceptions apply. Under certain conditions, the prohibition of insider dealing and market manipulation does not apply to trading in own shares, in buy-back programs or trading in securities for the stabilization of securities when some conditions laid down in MAR are met. Moreover, MAR does not apply to public authorities in pursuit of monetary, exchange rate or public debt management policy. Other specific exceptions apply.
MAR also provides a safeguard if the transaction was carried out for legitimate reasons and in accordance with market practices accepted by the competent authority (referred to as ‘Accepted Market Practices’ or AMPs), on which ESMA is required to issue an Opinion. The ESMA opinions on the AMPs and the annual reports on their implementation can be found in the ESMA Library.
The swift cooperation between the NCAs is ensured by a clear duty to cooperate set forth in MAR. The cooperation with third countries shall take place within the framework of specific cooperation arrangements to be entered into with the relevant supervisory authorities.
Without prejudice to the criminal sanctions laid down in CS MAD, MAR provides for a set of administrative sanctions and other administrative measures.
ESMA’s role with respect to MAR includes issuing technical advice to the European Commission, developing guidelines to market participants, drafting regulatory and implementing technical standards, and issuing opinions and Q&As, as further outlined below.
MAR empowers ESMA to develop draft regulatory technical standards (RTS) and implementing technical standards (ITS). ESMA delivered a first set of technical standards in 2015, on the following items:
- the conditions, restrictions, disclosure and reporting obligations for buyback programmes and stabilisation measures (RTS);
- the arrangements, procedures and record keeping requirements for persons conducting market soundings (RTS), and systems and notification templates to be used in market soundings and the technical means for appropriate communication (ITS);
- the establishment, maintenance and termination of accepted market practices (RTS);
- the arrangements, systems, procedures and notification templates to report suspicious orders and transactions (RTS);
- the technical means for the public disclosure of inside information and its delay (ITS);
- the precise format of insider lists and the format to update them (ITS);
- the format and template for the notification of managers’ transactions (ITS);
- the technical arrangements for the objective presentation of investment recommendations or other information recommending or suggesting an investment strategy and for disclosure of particular interests or indications of conflict of interest (RTS);
- procedures and forms for exchange of information and assistance between competent authorities;
- procedures and forms for competent authorities exchanging information with ESMA under Article 33 MAR;
- procedures and forms for exchange of information and cooperation between competent authorities, ESMA, the Commission and other entities under Articles 24(2) and 25 of MAR; and
- template document for cooperation arrangements with third countries (Art. 26 of MAR).
Pursuant to MAR, ESMA received three formal requests (mandates) from the European Commission to provide technical advice to assist the European Commission on the possible content of the delegated acts required by some provisions of the MAR. These reports to these mandates were published in 2015 and 2020.
ESMA published its technical advice related to the first two mandates in 2015. In addition, following the formal request to ESMA for technical advice on the report to be submitted by the Commission under Article 38 of MAR, ESMA delivered a final report on various aspects of the Market Abuse Regulation in 2020.
According to MAR, ESMA should publish:
- the list of any financial instrument for which a request for admission to trading is made, which is admitted to trading, or which is traded for the first time based on notifications received the competent authorities;
- the list of thresholds that apply and the justifications provided by competent authorities for such thresholds for notification of managers’ transactions;
- an annual report on aggregated information regarding administrative sanctions or measures imposed by competent authorities as well as criminal sanctions;
- an annual report on the implementation of the AMPs.
ESMA has also issued guidelines on:
- inside information for commodity derivatives markets or spot markets;
- for persons receiving market sounding: the factors for them to assess whether the information amounts to inside information, the steps to take if inside information has been disclosed to them in order to comply with MAR provisions on inside information and the records to maintain in order to demonstrate such compliance, or delays in disclosure of inside information; and
- delays in the disclosure of inside information.
ESMA has also issued a Q&As in order to promote common supervisory approaches and practices in the application of MAR and its implementing measures. This is a living document in the sense that ESMA will periodically review these Q&A and update them where required.
MAR requires ESMA to issue an Opinion to the NCAs about their intended AMPs, assessing their compatibility with the relevant legal requirements. The ESMA opinions on the AMPs and the annual reports on their implementation can be found in the ESMA Library.
In October 2021, ESMA issued a Public Statement on investment recommendations made on social media where it is made clear what investment recommendations are, how to post them on social media platforms and what the consequences of possible breaches of the Market Abuse Regulation can be.
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In light of an increased participation of retail investors in stock markets and following a rise in investment recommendations made on social media, ESMA decided to launch an EU-wide campaign together with the National Competent Authorities to make retail investors aware of the risks associated with relying on such recommendations when making investment decisions. ESMA’s initiative also aimed at informing those disseminating investment recommendations on social media and other unregulated platforms what happens if the rules set out in MAR are not respected.