On 20 October 2011 the European Commission published formal legislative proposals intended to update and strengthen the existing framework insuring investor protection under the Market Abuse Directive (2003/6/EC) (the "MAD"). The proposals consist of a regulation on insider dealing and market manipulation (the "Regulation") and a new directive on criminal sanctions for insider dealing and market manipulation (the "Directive"). This update gives a brief overview of the most notable proposed changes to the current European regulatory framework and their impact on the legal situation in the Netherlands.
Main Reasons for the Update
The proposed update of the MAD is intended to ensure a consistent approach to market abuse issues by regulators across the European Union and provide an updated regulatory framework in order to keep pace with market developments. The Regulation introduces prohibitions, requirements and corresponding harmonised civil and administrative sanctions and powers intended to be directly applicable in each member state. Implementation of these measures in national legislation will therefore not be necessary once the Regulation has entered into force. ESMA shall provide further technical standards for amongst others insider lists and appropriate public disclosure of inside information. Minimum criminal sanctions are set out in the Directive, which is to be implemented on a national level. The Regulation broadens and clarifies the scope of the current market abuse framework by clarifying the definitions of "market manipulation" and "insider trading" and expanding the scope of European market abuse legislation to cover transactions in financial instruments traded on MTFs or OTFs1 and OTC transactions and in any related financial instruments traded on these markets or on a regulated market. Currently, the Netherlands Financial Supervision Act (the "NFSA") prohibits insider trading and market manipulation in relation to instruments traded on MTFs in the European Economic Area. The Regulation also clarifies which high frequency trading strategies constitute prohibited market manipulation.
The update of the MAD is further intended to reduce administrative burdens of SME issuers by providing some relief with respect to publication of inside information and providing a lighter set of rules regarding insider lists than is applicable to larger issuers.
The Regulation sets out a broader definition of inside information...