EUROPEAN UNION:&nbspESMA Publish Market Abuse Regulation Q&A

Tuesday November 10 2015

The European Securities and Markets Authority (ESMA) has issued a Questions and Answers (Q&A) document regarding the implementation of the Market Abuse Regulation (MAR). The purpose of this document is to promote convergent implementation and application of the market abuse regime by providing responses to specific issues raised by the general public, market participants or competent authorities.

The document is aimed at national competent authorities, investors and market participants to ensure supervisory convergence by providing clarity on existing market abuse requirements, rather than creating an extra layer of requirements.

Question: Are credit institutions required under Market Abuse Directive (MAD) to publish systematically the results of the Pillar II assessment?

Answer: A main objective of the Market Abuse Directive (MAD) is to enhance market integrity. This is notably achieved through a prompt and fair disclosure of information to the public.

This objective has been translated into the requirement under Article 6 of MAD that issuers of financial instruments admitted to trading on a Regulated Market, or for which a request for admission to trading on such a market has been made, must inform the public as soon as possible of any inside information relating directly to them. According to Article 1 of MAD, inside information is such information that is:

• non-public,
• precise, and
• if it were made public would be likely to have a significant effect on the price of the issuer’s financial instrument or related financial instruments.

MAD offers, by way of exception to the immediate disclosure of inside information, the possibility on a case-by-case basis to delay such disclosure. An issuer may thus delay, under its own responsibility, the public disclosure of inside information such as not to prejudice its legitimate interests provided that such omission is not likely to mislead the public and the issuer is able to ensure the confidentiality of the information. However, it is not feasible to define ex-ante, in a general manner, how those conditions should be met and the concerned issuer needs to assess the particular circumstances before deciding to delay the disclosure of inside information.

Under MAD, an issuer can also be liable for market manipulation in case of dissemination of false and misleading information, including failure to properly disclose inside information to the public.

Many credit institutions across the European Union are issuers of financial instruments admitted to trading on a Regulated Market and thus subject to the regime established under the Market Abuse Directive, when at the same time they are also subject to the prudential supervision of the banking regulators.

Consequently, in the context of the Supervisory Review and Evaluation Process (SREP) to be conducted in accordance with Article 97 of Directive 2013/36/EU (CRD IV), whenever a credit institution subject to the market abuse regime is made aware of information, notably the results of the exercise, it is expected to evaluate whether that information meets the criteria of inside information. If these criteria are met, the MAD provisions, as transposed into the national law of the Member States, apply with respect to the relevant disclosure requirements. Such a credit institution would have then to publicly disclose the inside information unless it has delayed such a disclosure after having assessed that all the conditions for delaying apply.

ESMA recalls that, in line with the Third Set of CESR Guidance on the common operation of the MAD, if and when a publication (e.g. an article published in the press or internet postings) which is not resulting from the issuer’s initiative in relation to its disclosure obligations or a rumour in the market relates explicitly to (a piece of) information that is inside information within the issuer, the latter is expected to react and respond to the relevant publication or rumour if that (piece of) information is sufficiently accurate to indicate that a leak of information has occurred and, thus, that the confidentiality of this inside information is no longer ensured. In such circumstances, which should be the exception rather than the rule and should be examined by the issuer on a case by case basis, a policy of staying silent or of “no comment” by the issuer would not be acceptable. The issuer’s reaction or response should be made publicly available in the same conditions and using the same mechanisms as those used for the communication of inside information, so that an ad hoc announcement has to be published without undue delay.

Finally, it is noted that the disclosure of inside information is a matter of national supervision and enforcement of MAD, solely under the competence of the national competent authorities designated to that effect in accordance with Article 11 of MAD and whose heads are members of the Board of Supervisors of ESMA.

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