Banking and financial law,
Company and association law,
Economic and commercial law
1. Recent transactional settlements agreed by FSMA's Management Committee and published on its website highlight the importance of the trade reporting obligation imposed by Article 19 of the Market Abuse Regulation (EU) 596/2014 ("MAR") and its delegated and implementing acts.
It seems useful to recall the main lines, without claiming to be exhaustive.
2. Article 19 of MAR requires persons discharging managerial responsibilities in issuers ("PDMRs" for "directors") to Persons Discharging Managerial Responsibilities ) and those closely associated with them ("PCA" for "PCA"). Persons Closely Associated ") to notify the issuer in question and FSMA, within three working days, of all transactions carried out for their own account in securities issued directly (shares, bonds, other debt securities) or indirectly (derivatives or other related financial instruments) by that issuer, provided that the amount of such transactions reaches or exceeds the threshold of EUR 5,000 in a calendar year. Article 10 of the Delegated Regulation 2016/522 (EU) details the transactions covered by this obligation in a non-exhaustive manner (1).
The issuers concerned are public or private entities whose securities are admitted to trading (or whose admission has been requested) on a regulated market or an alternative trading platform of the "MTF" or "OTF" type, i.e. in particular listed companies within the meaning of the Companies Code and associations (2).
3. In principle, the debtor of the notification obligation is the PDMR/PCA concerned. However, this person may - without transferring its responsibility - appoint an agent to make the notification. This may be the case when the securities are held in a portfolio managed by a portfolio manager. It is also possible for the issuer itself to arrange for the notification of transactions of its directors to FSMA, which presupposes that the transactions are duly notified to the issuer itself beforehand. In such cases, FSMA expects issuers to take reasonable precautionary measures to organise pre-notification control (Circular FSMA_2016_08).
However, the issuer is not obliged to make public the transactions notified to it, as this task has been devolved to the FSMA, which publishes the transactions notified to it on its website (Article 25, § 2 of the Law of 2 August 2002 and derogation from Article 19(3) of the MAR) within two working days following the notification.
Notifications to the relevant issuer and to FSMA are made via the "eMT" application, set up by FSMA and meeting the technical requirements of Implementing Regulation (EU) 2016/523.
4. Article 19(1)bis) of MAR provides for exemptions from the notification requirement. This is the case, for example, when the issuer's securities are held in a collective investment undertaking (CIU) and the exposure of the CIU to the issuer's securities does not exceed 20%. In such a case, the relevant person is not required to notify transactions in the units of the collective investment undertaking.
5. In addition to the notification obligation, MAR prohibits PDMRs from carrying out, directly or indirectly, any transactions (regardless of the amount) in the securities referred to supra (§2) during a 30 calendar day standstill period prior to the announcement of an interim or year-end financial report which the issuer is required to make public. The issuer may allow, in specific cases, an exemption from this prohibition (Article 19(11) and (12) of MAR). Belgian issuers may voluntarily extend these standstill periods, provided that such measures are compatible with the provisions of the Companies and Associations Code governing restrictions on the transferability of securities.
6. To ensure proper enforcement, Article 19(5) of the MAR requires issuers to notify PDMRs in writing of their obligations under Article 19 of the MAR (PDMRs in turn must notify their BCPs in writing). Issuers are also required to maintain a list of their PDMRs and BCPs.
Investment service providers ("providers") will be particularly careful to identify their clients as PDMRs and/or PCAs, as they are exposed to the risk of market abuse when they carry out transactions in the name of and/or on behalf of these persons. They may also contractually provide, as an agent, to notify themselves or refuse to carry out transactions in the securities in question. A deficient internal organisation in this respect exposes the service provider to sanctions.
Investment services providers that are otherwise issuers will also be mindful of the possible interactions between the regime for directors' transactions and that for "personal transactions" under MiFID II, as such transactions are also subject to specific restrictions and obligations (Delegated Regulation (EU) 2017/565).
However, whatever measures are put in place to ensure compliance with Article 19 of MAR, data subjects, issuers and service providers should remain vigilant as regards compliance with other obligations or prohibitions laid down by MAR, including those relating to the (non-)disclosure of inside information, insider trading and market manipulation.
7. Article 19 of the MAR is subject to criminal sanctions and failure to comply with its obligations may also be subject to administrative sanctions imposed by the FSMA. FSMA assumes the tasks devolved to the competent authorities by MAR and monitors compliance with this regulation on the basis of Article 25 of the Law of 2 August 2002 on the supervision of the financial sector and financial services.
For more information, please contact: Marc-David Weinberger (marc- email@example.com) and Antoine Mairesse (firstname.lastname@example.org), lawyers, CEW & Partners.