Proposed changes to the market abuse regime may have a
far-reaching impact, beyond what even the European Commission
had in mind when it drafted the legislation.
In the Market Abuse Directive (MAD), the EC has proposed
widening the categories of information that would qualify as
Its possible that those drafting it werent
aware of all the practical consequences that expanding the
scope of the legislation to this extent would have, said
Lucy Frew of Gide Loyrette Nouels London practice.
The European Banking Federation (EBF), one of the most
powerful industry bodies in Europe, added its voice to the
debate this month, saying that many of the ECs proposals
to create greater harmonisation in the fight against market
abuse are ambiguous.
According to the EBF, the widening of the definition of
inside information is disproportionate. It recommends that the
definition reflects that inside information should be price
sensitive in nature.
Some of the proposed changes, if implemented in their
current form, have the potential to fundamentally change
liability for market abuse across Europe, the functioning of
European trading venues, and the behaviour of corporates whose
securities are traded on those venues, said Karen
Anderson of Herbert Smith in London.
The limited nature of the express defences in the Market
Abuse Regulation (MAR) is also among the key concerns to the
practical operation of the ECs proposed new regime.
Because of the way in which the ECJ approached its
analysis in Spector Photo, the removal of key recitals
presents a potentially significant issue that may not have been
fully anticipated, added Anderson.
Some believe that the removal of the recitals suggests an
intention that they should no longer be relied on.
If that is not the case, there should be no objection
to the restitution of these recitals in the regulation,
The widening of the definition of what constitutes an
offence would make it much easier to bring a criminal
prosecution and to prove inside knowledge.
According to Anderson, the point that the EBF makes about
the practical difficulty for market participants in identifying
which securities come under this market abuse rule is
Market participants will be liable for contraventions of the
Market Abuse Regulation (MAR) even though they may not have
realised that their conduct was caught by it.
In the paper, published on January 4, the EBF called for a
full list to be created of all financial instruments to which
the new rules will apply. The issue is, how to manage this
list. Esma is relying on knowing and being able to publish
almost immediately when an instrument is traded for the first
time on an OTF. The OTF operator may not even know that
Most people believe there will be at least some tweaking
around the edges of MAR. But the real question with the
ECs proposals is: if the intention was not to change the
fundamentals of the insider dealing offence, then why was the
regulation drafted in this way?
Click here for a link to the full EBF