Nov 18, 2024
key takeaways
Proposed in 2022 as part of the EU's Capital Markets Union, the Listing Act package aims to simplify listing requirements and ongoing post-listing obligations to make public markets more attractive to EU companies and support access to capital for SMEs.
The Listing Act package comprises three primary measures:
In this update, we consider the changes to be made by the Listing Regulation to the MAR regime which are of most relevance to debt issuers. To see our thoughts on the Listing Act changes to the Prospectus Regulation, click here.
Background
MAR created a robust framework to prevent insider dealing, unlawful disclosure of inside information and market manipulation and to safeguard the integrity of EU markets. The extensive obligations that it imposes have created a disproportionate burden for issuers. Acknowledging this, the Listing Regulation will introduce targeted changes to MAR to rebalance the more onerous obligations while continuing to emphasise investor protection.
Steps in protracted process
Subject to limited exceptions, issuers are obliged by MAR to disclose inside information to the market as soon as possible. The Listing Regulation will disapply this obligation as regards "inside information related to the intermediate steps in a protracted process". Only the "final circumstances or final events" in that process will trigger a disclosure obligation. The Recitals acknowledge that it is not always straightforward to identify when a set of circumstances has become final. The Commission will therefore be empowered to adopt a Delegated Act setting out a non-exhaustive list of final circumstances or final events and the moment at which those events or circumstances are deemed to have occurred.
This change will bring a sigh of relief from any issuer team previously faced with choosing between delaying disclosure ("at its own responsibility") and immediate disclosure, which could be sub-optimal in terms of timing or interpreted as misleading in hindsight. Issuers should note that notwithstanding this refinement of the disclosure obligation, intermediate steps in a protracted process may still independently or collectively constitute inside information and should be assessed accordingly.
Delayed disclosure
The conditions for delaying disclosure of inside information will be relaxed by the replacement of the "not likely to mislead the public" test with a new condition that the information delayed is "not in contrast with" the issuer's latest announcement or communication on the same matter. This is a more objective and verifiable standard and reflects the most recent guidelines from ESMA on the point. The other conditions to delaying the disclosure of inside information are unchanged.
Additionally, the ability of a bank or other financial institution to delay disclosure of inside information on grounds of preserving the stability of the financial system will be extended, sensibly, to parent undertakings of those institutions.
Market soundings
The original market soundings regime created a cumbersome administrative process for recording discussions with investors to gauge interest in a potential deal and terms. Differing views were held as to whether it was an opt-in regime (the better view) or a mandatory process. It will now be clarified as an optional safe harbour. Market participants can decide to avail of the regime but failure to do so will not automatically constitute an unlawful disclosure. However, market participants opting out should consider how they intend to stay on the right side of Article 10 of MAR.
The market soundings regime will also be made available for deals that are not formally announced. In addition, the obligation on disclosing market participants to inform recipients of market soundings where information received in the course of a market sounding has ceased to be inside information will no longer apply where that information has been publicly announced.
Managers' transactions
The threshold for notification of transactions by directors and other persons discharging managerial responsibilities and persons closely associated with them will be increased to €20,000 in a calendar year. A national competent authority ("NCA") may increase the threshold to €50,000 or decrease it to €10,000 in light of market conditions.
Insider lists
The initial proposal for the Listing Regulation would have replaced the current regime of event-driven insider lists with, broadly speaking, a regime of permanent insider lists. ESMA raised "substantial concerns" in March 2023 that this change could frustrate the enforcement work of NCAs and weaken issuers' control of inside information. This element of the proposal did not advance following ESMA's intervention and there are no substantive changes to the rules on insider lists contained in the Listing Regulation. ESMA has however been tasked with reviewing the template insider list currently used by issuers admitted to trading on SME growth markets and specifying a new alleviated format for use by all issuers by early September 2025.
Inside information
The original limb (d) of the definition of inside information which captures front running applies only to order-related information conveyed by a client in the hands of the executing broker or manager. This limb will be extended to apply to such information held by any person, regardless or role or function, who is aware of the pending order.
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