There has been published two identical letters that the European Parliament’s Committee on Economic and Monetary Affairs (ECON) has sent to Steven Maijoor (Chairman, ESMA) and Jonathan Hill (EU Commissioner for Financial Stability, Financial Services and Capital Markets Union) concerning the Market Abuse Regulation (MAR) and managers’ transactions.
In both letters ECON refers to a meeting of the European Parliament Negotiating Team for MAR which met on 12 May 2015. At this meeting ECON discussed the issue of managers’ transactions, and specifically the proposal in the technical advice of the European Securities and Markets Authority (ESMA) to treat transactions in baskets, index-related instruments and investment funds differently to transactions in other financial instruments for the purposes of reporting. The letter adds that in practice, ESMA’s proposals would mean that persons discharging managerial responsibilities (PDMRs) would not have to report transactions in baskets, index-related instruments or investment funds should shares in their own company constitute less than 20% of such financial instruments.
The letter states that both the European Commission (EC) and the European Parliament (EP) legal services have concluded that the level 1 text of MAR does not, as drafted, allow for such a threshold to be introduced. Both legal services have stated that if the co-legislators wish for a threshold to be introduced then a “quick fix” of the level 1 text would need to be made. ECON confirms that having discussed the issue the EP is of the view that such a threshold should be introduced.
The letter then states that ECON has discussed the specific level of the threshold and has concerns. It notes that ESMA makes comparisons with the 20% threshold set out in the Transparency Directive in order for investors in baskets, index-related instruments or investment funds to be eligible for voting rights. However, ECON states that this is not, in the EP’s view, an appropriate comparator. It believes that the point at which you gain voting rights in a company should be different to the point at which you have to report transactions for the purposes of monitoring and tackling market abuse, as the two things are very different.
ECON also states that on the evidence that it has currently seen from ESMA, the EP is not convinced that the threshold should be set at 20%. It states that the benchmark should be whether or not the transaction in the shares of the PDMR’s company can be deemed to be insignificant in relation to the overall market when it comes to assessing market abuse.
The letter finishes stating that the issue will be a major focus of a meeting between ECON, ESMA and the EC on 27 May 2015.
View Market Abuse Regulation – Managers’ transactions, 22 May 2015