ESMA clouds MAR with Guidelines

As the forthcoming EU Market Abuse Regulation creeps up on us, we now have a further dollop of related regulation, this time in the form of draft ‘Guidelines’ from ESMA (Draft guidelines on the Market Abuse Regulation, ESMA/2016/162). We aren’t very used to paying any real attention to EU Guidelines. In fact we aren’t all that used to implementing European regulations, given that EU measures usually come out as directives. MAR is not exactly breaking new ground, but, for many, it is still largely unfamiliar territory.

Before reading the Guidelines, take several anti-depressants. It is difficult to escape the conclusion that it was written by an unaccompanied minor hurrying home for tea. No doubt this is ESMA’s very best English – an unusual twist on the concept of the best driving out the good. Those who have read it will be seen reaching for the ballot paper as they contemplate life regulated by a single European rulebook.

The Guidelines cover two issues from MAR: market soundings and “legitimate interests of issuers to delay inside information and situations in which the delay of disclosure is likely to mislead the public”. This note focuses on the former, given that it is likely to have a wider audience, not only because it is more succinctly entitled.

Among the childish niggles is that most of the draft guidelines are little more than statements of the obvious. There ESMA might reasonably argue that it is only doing what it is mandated to do by its parent. Rather more substantive is the complaint that several guidelines are so poorly drafted that the Regulation would be clearer without them. More seriously, we have an example of drafting where it is unclear whether ESMA means what it says, genuinely intending that ‘Insider Lists’ should include people who are not in possession of inside information. Or is it just another typo? For proponents of the single European rulebook, this CP should be required reading.

So what is the big issue? It is the absence of actual guidance where the going gets tough. ESMA puts its finger – intelligently – on a vexed matter: that brokers who have received inside information and pass it on to clients in the normal way are not expressly protected from allegations of unlawful disclosure. So what does ESMA, the entity charged with bringing about ‘harmonisation’ in supervision, do about it? Nothing. They offer no guidance on whether this remains a legitimate practice of benefit to those seeking capital from the market – and what is CMU all about, one wonders – or whether this is a deliberate move to discourage or even surreptitiously to eliminate, without any CBA or other tiresome process discipline, this unscrupulous conduct. How should firms react? How should national regulators react? Let us hope the FCA will have the balls to go where eurocrats fear to tread.

But back to the big picture. No one could describe MAR as revolutionary; it is just about European standardisation, ensuring the removal of any national delinquency. As with so many measures that fall into that exploding corpus, it reflects that infamous military order to move the encampment six feet to the left. But this is not just some commander’s joke; this is for real. Firms must comply with MAR by 3rd July (by which time ESMA may or may not have published its finalised Guidelines). FCA is unlikely to be slow to insist that it happens.


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