EU Listings Act Proposed Changes to Insider Lists
In April 2024, the European Commission published its near final version of three pieces of legislation known as the "EU Listings Act." The UK is not expected to bring about changes to the Market Abuse Regime for the next year.
The EU Listings Act, part of the European Union’s efforts to strengthen its capital markets, aims to simplify the rules around public offerings and listings of securities. The Act is designed to make EU capital markets more attractive and accessible, especially for small and medium-sized businesses looking to raise capital. One of the components of the Listings Act is the management of insider lists, which are crucial for maintaining market integrity and transparency. Insider lists play a significant role in the regulatory framework designed to combat insider trading. Under the Market Abuse Regulation (MAR), companies whose securities are traded on regulated markets are required to maintain a list of all persons who have access to inside information. A detailed guide on the requirements and format of insider lists can be found here.
Challenges in Managing Insider Lists
The EU Listings Act identifies several challenges that companies face in adhering to insider list requirements:
- Administrative Burden: Maintaining insider lists can be particularly burdensome for smaller firms.
- Compliance Costs: Ensuring compliance with MAR and GDPR incurs significant costs.
- Enforcement Consistency: The effectiveness of these regulations depends on consistent enforcement across all EU member states, which can vary widely.
To address these challenges, the EU Listings Act aims to limit the inclusion of individuals on insider lists to those who have regular access to inside information, excluding those who may only have access on a case-by-case basis.
Concerns from the European Securities and Markets Authority (ESMA)
The European Securities and Markets Authority (ESMA) published a press release in 2023 expressing concern that the proposed changes could hinder the National Competent Authorities' (NCA) ability to prevent market abuse. These changes could affect issuers who rely on insider lists to regulate the dissemination and access to inside information. The main concern is the difficulty in timely identifying non-permanent insiders. The NCA would also struggle to determine which permanent insider accessed each piece of information and when. This could affect issuers' ability to safeguard themselves, their employees, and third parties, potentially leading to a lack of awareness among insiders and weakening issuers' control over inside information. ESMA's concerns raised in the letter can be found here.
Proposed Amendments and ESMA's Opinion
The proposed Implementing Technical Standards (ITS) create a new type of insider list for SME Growth Market (SME GM) issuers under the general regime, representing only those persons having "regular access to inside information" in a static manner. ESMA concluded that the insider list, as indicated in the European Commission's amendment, would make the detection, investigation, and enforcement of market abuse cases more difficult. ESMA is of the view that the content of the insider list should remain unchanged. The detailed opinion can be found in ESMA's document here.
Conclusion
The EU Listings Act represents a significant effort to enhance the attractiveness and accessibility of EU capital markets, particularly for SMEs. However, the proposed changes to insider list requirements have sparked debate about the balance between reducing administrative burdens and maintaining robust market abuse prevention mechanisms. As the dialogue continues, it is crucial for companies to stay informed about the evolving regulatory landscape to ensure compliance.