Firms still aren’t ready for MAR

Author: Lizzie Meager | Published: 14 Jul 2016
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wEleven days after it became effective, many firms have not finished implementing the requirements of the EU’s new Market Abuse Regulation (MAR), according to counsel. And compliance is made more difficult by the fact the regulator responsible, the European Securities and Markets Authority (Esma), hasn’t finished drafting the final legislation.

Among other changes, the new rules mean firms must announce instances of inside information as soon as possible, hold detailed insider lists with extensive personal information, and make changes to existing share buyback codes.

"My impression is that there are still many companies that are not compliant," said Dirk Kocher, partner at Latham & Watkins in Hamburg. "It’s mainly smaller institutions that may not have the personnel or mindset or culture for these rules, and are subject to this for the first time."

While the law is the same in substance as its predecessor the Market Abuse Directive (MAD), the scope of MAR is broader, encompassing a wider variety of firms, including first-time issuers of securities.

And because it’s a regulation and not a directive, it’s implemented directly at EU level and so not present on the statute book – but enforced at domestic level. Carol Shutkever, partner at Herbert Smith Freehills, said this has been a problem because Esma doesn’t oversee markets in the same way as the UK’s Financial Conduct Authority (FCA), so the market has had to look to national regulators to understand the approach to enforcement.

"And yet at the same time, the new rules are made in Europe and so there is not the detailed national level implementation and guidance that participants have been used to under the old domestic-led regime," she added.


  • Although it became effective on July 3, counsel say many firms in Europe won’t be compliant with its requirements;
  • Navigating it has been difficult for many companies not used to market abuse rules or legislation set at EU level;
  • National competent authorities are restricted in the guidance they can offer as they didn’t write the rules themselves but still must enforce them;
  • The picture is complicated by the fact Esma hasn’t finished writing the rules. Implementing guidance for the publication of insider information, for example, hasn’t yet been provided.

Concerns about what this could mean post-Brexit aside, it’s also meant that rather than writing the content of the regulation directly into its handbook, the FCA has instead signposted to the EU regulation itself. "And European regulations are drafted in a particular style which many commercial businesses probably aren’t used to," said Peter Wright, partner at Fox Williams in London.

"It’s incredibly user-unfriendly," said Marcus Funke, partner at Latham & Watkins in Frankfurt. "Best practice will develop over time, but I expect it’s going to be bumpy over the next 12 to 18 months." And while this tends to be a common problem for companies unfamiliar with EU regulation, market participants agree that it’s especially acute with MAR.

"If an associate at my firm had drafted something of that quality, they wouldn’t have a job anymore," said an unnamed partner. "The language is incoherent and the translations are poor. To be on the safe side I’ve advised clients to read it in two or three different languages."

One of the bigger changes from MAD to MAR is that the only requirement for the regulation to apply is that the instrument in question is traded on a European trading venue – none of the parties involved need to have any connection to the EU whatsoever. "A big challenge has been for the overseas desks of UK firms – making sure they’re aware that abuses can happen anywhere but still be caught," said Shutkever.

"To be on the safe side I've advised clients to read it in two or three different languages"

Because the regulation has to be uniform across Europe, the high level of detail required has led to much of the confusion, explained Funke. This is an issue outgoing EU commissioner Jonathan Hill acknowledged, calling overly complex regulation 'like some high priesthood speaking in a special language that is beyond the comprehension of mere mortals…it weakens individual responsibility…it eats away at trust in law making’.

Hearing this, some may be hoping for the rules to be revisited as part of the European Commission’s call for evidence for the cumulative impact review of financial services legislation. But Wright thinks this is unlikely: "Considering the high profile cases of the recent past, no one’s going to lobby against better protections against market abuse."

He does however expect there to be a string of enforcement cases in the future. "It’s almost invariably the case that there are firms out there not complying today," he said. "And while the regulators aren’t knocking at the door policing it now, if something looks suspicious later down the line that’s when we’ll see closer inspection of MAR compliance."

But the biggest obstacle to compliance is undoubtedly the fact Esma still has not issued its implementation guidance on the publication of insider information. "It’s a crucial area for issuers, seriously need-to-know, and its delay is incredibly restrictive," said Kocher.

The FCA refers to this in a policy statement from April, noting that it will reassess handbook provisions when the guidelines are released. But still no timeline has been given by Esma as to when this will happen.

"While Mifid II requires more changes to procedure, the scope of MAR means that its impact is far-reaching, and a significant compliance challenge," said Shutkever. "It’s a fundamental shift in the way Europe’s markets are regulated."

See also

Mifid II delay raises questions over MAR
Market Abuse Directive: what the EC did wrong
Steven Maijoor on EU reform’s progress