On 3 July 2016, Regulation (EU) No 596/2014 of 16 April 2014 on market abuse (the “Market Abuse Regulation”) became directly applicable in Luxembourg. The aim of the Market Abuse Regulation is to provide for harmonised and strengthened rules across the European Union regarding the prevention, detection and sanctioning of market abuse by replacing the existing legal framework set out in Directive 2003/6/EC, as transposed into Luxembourg law by the law of 9 May 2006 on market abuse (the “Market Abuse Law”) and by enhancing market integrity and investor protection. In this context, the Luxembourg Minister of Finance introduced the bill of law No 7022 into the legislative process on 29 July 2016 (the “Bill of Law”), the objective of which is to ensure the proper application of the Market Abuse Regulation and the transposition into Luxembourg law of Directive 2014/57/EU of 16 April 2014, on criminal sanctions for market abuse (the “Market Abuse Directive II”).
Although the Bill of Law foresees the abolishment of the Market Abuse Law, the legal frameworks of both the Market Abuse Regulation and of the Market Abuse Law should be simultaneously applicable until the latter is formally repealed. However, in the event of a conflict between the Market Abuse Regulation and the Market Abuse Law, the provisions of the Market Abuse Regulation prevail. The Commission de Surveillance du Secteur Financier (“CSSF”) has prepared a substitution table indicating the relevant provisions of the Market Abuse Regulation and the Market Abuse Law1.
I. MARKET ABUSE REGULATION
While the Market Abuse Regulation mainly contains provisions clarifying and detailing the existing legal framework, it also introduces some key changes. Those key changes include extending the scope of the instruments subject to the market abuse regime, for example financial instruments admitted to trading on unregulated markets such as multilateral trading facilities (MTF) - in Luxembourg the Euro MTF - and other organised trading facilities (OTF) in a Member State.
Issuers having their financial instruments listed on the Euro MTF are therefore now required to comply with all reporting and disclosure obligations, in an attempt to prevent market abuse in the form of insider dealing and market manipulation, being (i) the immediate2 disclosure of “inside information”3, (ii) the drawing-up and constant updating of an ’insider list‘ under a specific format4 and (iii) the notification of transactions exceeding EUR 5,000 per calendar year carried out by such persons who effect managerial responsibilities of an issuer (e.g., directors, senior officers…) along with persons closely associated with them, relating to financial instruments of that issuer5. The Luxembourg Stock Exchange recently published a list of frequently asked questions regarding the impact of the Market Abuse Regulation on issuers listing on the Luxembourg Stock Exchange Markets, their obligations to comply and the recommendations given by the Luxembourg Stock Exchange in this respect. This information is available on the Luxembourg Stock Exchange website.
The Market Abuse Regulation also extends the notion of market manipulation, which now captures any behaviour “which gives, or is likely to give, false or misleading signals as to the supply of, demand for, or price of, a financial instrument”. Examples of this may include the spreading of rumours via websites, blogs and/or social media6.
On this matter, the European Securities and Markets Authority (“ESMA”) published its first opinion with respect to the scope and interpretation of the Market Abuse Regulation as a part of its question and answer paper dated 13 July 2016. The CSSF also announced in its press release 16/31 that the new legal framework may be further detailed in future circulars, or reflected in the frequently asked questions provided by the CSSF on its website. The CSSF may, in particular, also amend or respectively revise its circulars 06/257, 07/280 and 07/323, which were issued with regard to the Market Abuse Law.
The Market Abuse Regulation provides civil/administrative sanctions and fines7 that are to be backed up by criminal sanctions when the Market Abuse Directive II is implemented in Luxembourg.
II. BILL OF LAW
Apart from the formal repeal of the Market Abuse Law, the Bill of Law aims to introduce a legal framework for the administrative and criminal prosecution of violations against applicable market abuse provisions. In this context, the Bill of Law confers extensive information rights and sanction powers to the CSSF, which will become the competent national authority responsible for the supervision of the correct application of the Market Abuse Regulation and the compliance with its provisions. In addition, the Bill of Law contains provisions governing the cooperation duty of the CSSF with the Luxembourg public prosecutor’s office, the supervisory authorities of EU member states and of other countries.
1. http://www.cssf.lu/fileadmin/files/MAF/Abus_de_marche/Substitution_table.pdf
2. Except where it is in the issuer’s legitimate interests to have the inside information disclosure postponed, provided that such a postponement is not likely to mislead the public and that the issuer is able to ensure the confidentiality of this information – see article 17.4 of the Market Abuse Regulation.
3. This information consists, in particular, of “information of a precise nature, which has not been made public, relating, directly or indirectly, to one or more issuers or to one or more financial instruments, and which, if it were made public, would be likely to have a significant effect on the prices of those financial instruments or on the price of related derivative financial instruments”– see article 7.1 (a) of the Market Abuse Regulation.
4. Such lists should contain information on: (i) the identity of the persons having access to inside information, (ii) the reason for having those persons included in these lists, (iii) the date and time of day when those persons had access to inside information and (iv) the date on which these lists were established or updated – see article 18 of the Market Abuse Regulation.
5. On this matter, the Commission Delegated Regulation (EU) 1016/522 dated 17 December 2015 provides (non-exhaustive) examples of transactions that are to be notified under the scope of this obligation.
6. See article 12 of the Market Abuse Regulation.
7. See article 30 of the Market Abuse Regulation.
