EU Listing Act - Significant changes to the market abuse regime

Key aspects

This Legal Insight focuses on relevant changes to MAR. In relation to changes to the prospectus regime, please see the separate legal insight.

In respect of the amendments to MAR, the EU Listing Act aims to facilitate capital markets compliance for issuers while maintaining adequate investor protection. Changes to MAR encompass the following key aspects:

• Intermediate steps in protracted processes no longer trigger inside information disclosure requirements.
• Criterion pursuant to which delayed disclosure of inside information must not mislead the public will be replaced.
• Thresholds for directors' dealings reporting will be increased.
• Amendments to the market sounding framework.

Disclosure requirements in protracted processes

Until now, intermediate steps in a process, such as milestones in a multi-stage transaction, could qualify as inside information and thus be subject to disclosure requirements. While disclosure may be postponed under certain conditions, justifying such a delay can be difficult, particularly during a dynamic M&A process or ongoing restructuring negotiations.

Under the revised MAR, issuers no longer must decide between immediate or postponed disclosure in protracted processes; only the "final event" must be disclosed. Under the amended regime, determining what qualifies as a final event will be decisive. The European Commission will be empowered to adopt a delegated regulation, setting out a non-exhaustive list of what events or circumstances qualify as "final" events or circumstances.

Postponing disclosure

Under the existing MAR regime, the disclosure of inside information may be postponed, if (i) immediate disclosure is likely to jeopardise the issuer's legitimate interests, (ii) postponing disclosure is unlikely to mislead the public, and (iii) the issuer is able to ensure the confidentiality of inside information.

Following the amendments by the EU Listing Act, conditions (i) and (iii) will remain unchanged, while (ii) will be amended: disclosure may only be postponed if it is not contrary to the latest public announcements or other information provided by the issuer. The European Commission will be empowered to adopt a delegated regulation, setting out a non-exhaustive list specifying such circumstances. From a practical point of view, replacing the criterion "not likely to mislead the public" is a welcome step. It helps issuers assess whether the inside information, whose publication they intend to postpone, contradicts their prior communications. The new provision is therefore somewhat narrower in scope than the previous regime.

An issuer that is a credit or financial institution may postpone public disclosure of inside information to preserve the stability of the financial system subject to the conditions set out in Article 17 (5) MAR. Article 17 (5) MAR will soon be broadened to apply to the parent undertakings of these institutions.

Directors' dealings (managers' transactions)

The EU Listing Act will raise the threshold for managers' transactions to EUR 20,000 per calendar year (previously it was EUR 5,000). The competent national authority can increase this threshold to EUR 50,000 or decrease it to EUR 10,000. It remains to be seen whether the national authorities will exercise this right to amend thresholds. Exceptions to the trading ban due to exceptional circumstances or under employee schemes during a so-called "closed period" (e.g. 30 days before publication of the issuer's financial results) will be extended to types of financial instruments other than shares. In addition, the EU Listing Act introduces a new exemption under which trading bans for managers' transactions apply only if they are based on a deliberate investment decision. For instance, accepting donations, inheritances, or exercising options agreed outside the closed period is permitted.

Market sounding

Following the amendments under the EU Listing Act, the definition of market sounding will soon include communications of inside information to potential investors independent of the announcement of a specific transaction. Issuers may therefore benefit from the safe harbour regime linked to market sounding, even though inside information is disclosed to potential investors outside the context of a specific transaction (subject to the requirements under Article 11 MAR).

The market sounding regime is optional for disclosing market participants. This means that any disclosing market participant may follow the market sounding framework pursuant to Article 11 MAR and will benefit from the safe harbour regime. Alternatively, any disclosing market participant who chooses not to do so will not be suspected of having unlawfully disclosed inside information.

Share buybacks

Pursuant to the amendments to MAR, share buyback programmes only need to be reported to the competent authority of the market most relevant for the shares' liquidity, instead of to each competent authority of the market where the issuer's shares are listed. Additionally, issuers only need to publicly disclose aggregated information in respect of buyback programmes. However, individual transactions still must be reported to the competent authority on a case-by-case basis.

Sanctions

Under the EU Listing Act, administrative pecuniary sanctions under MAR will generally be calculated based on total annual turnover, linking the fine to the size of the company. If the resulting sanction is disproportionately low, the competent authorities may increase the fine based on absolute amounts, considering all relevant circumstances, including those set out in Article 31 MAR.

The administrative fines pursuant to revised MAR amount to up to (i) 15 % (or EUR 15m) for any violation of the prohibition of insider dealing, unlawful disclosure of inside information and market manipulation, (ii) 2 % (or EUR 2.5m) for any infringements related to the prevention and detection of market abuse and breaches of the obligation to publicly disclose inside information, and (iii) 0.8 % (or EUR 1m) for violations of managers' transactions reporting duties and any requirements in respect of insider lists. For SMEs, the minimum fines are EUR 1m for any failure to disclose inside information to the public and EUR 400,000 for the failure to draw up insider lists or to adequately report managers' transactions.

Entry into force and application

Most of the amendments to MAR will enter into force on 5 December 2024. The new framework applicable to the public disclosure of inside information, under which it is no longer required to disclose intermediate steps in protracted processes, and the replacement of the condition "not likely to mislead the public", when the issuer wishes to delay disclosure of inside information, will enter into force 18 months later. Member States must take necessary measures to comply with the new sanctions regime within 18 months after the entry into force of the EU Listing Act.

authors: Christoph Moser, Daniel Gritsch