The European Commission has published a public consultation on revisions to the Market Abuse Directive (“MAD”).
The Commission hopes to achieve a number of objectives by this review, including;
- increasing market integrity and investor protection by “filling the gaps” in coverage;
- strengthening effective enforcement against market abuse;
- improving the transparency, supervisory oversight, safety and integrity of derivatives markets; and
- increasing co-ordination of action among national regulators and with the new European Securities and Markets Authority.
The consultation is divided into three sections:
Extension of the scope of the MAD
The Commission is considering extending the scope of the MAD to:
- cover all financial instruments which are admitted and/or traded on a multilateral trading facility, but not traded on a regulated market;
- cover market manipulation by the use of over-the-counter instruments;
- catch attempted market manipulation; and
- adapt the definition of inside information for commodity derivatives.
However, the Commission is also consulting on whether the regime should be adapted for smaller companies (SMEs) to avoid disproportionate costs being imposed upon them.
Enforcement powers and sanctions
The Commission proposes that authorities’ enforcement powers should be strengthened by:
- new requirements on suspicious transaction reporting to give regulators means to detect abuses;
- greater investigatory powers (overriding the e-privacy directive); and
- introducing more effective and deterrent sanctions.
Single rulebook
The MAD offers Member States a number of options for implementing the regulatory framework and this together with different interpretations of key concepts has, the Commission considers, led to wide divergences in the rules at national levels.
The Commission proposes:
- that all issuers be required to disclose to the competent authority that they have delayed disclosure of inside information after it is in fact disclosed
- giving responsibility to regulators to decide whether disclosure of information can be delayed where this would be in the public interest in the case of a systemically important issuer;
- raising the threshold for disclosure by directors and PDMRs of dealings in their companies’ securities to €20,000 (though it is not clear whether applying this threshold would be mandatory). The UKLA does not apply the current threshold of €5,000.
The consultation closes on 23 July 2010. The Commission intends to publish proposals to amend the MAD before the end of 2010 with further proposals relating to the implementing directives made under the MAD to be developed later.
Click here for a copy of the Consultation Paper.
