Worldwide: Governance & Securities Law Focus: Europe Edition, July 2017

In this newsletter, we provide a snapshot of the principal European, US and selected international governance and securities law developments of interest to European corporates.

EU Developments

General European Commission Publishes Guidelines for Reporting of Non-Financial Information

On 26 June 2017, the European Commission (the "Commission"), published guidelines on the methodology to be adopted by certain large companies and groups when reporting non-financial information under Directive 2014/95/EU amending the Accounting Directive. The Commission's intention is to improve the quality, relevance, usefulness, consistency and comparability of companies' non-financial information in a way that creates greater market transparency for stakeholders and so fosters growth. The guidelines are based around key principles, which include the guidance that disclosure must:

European Commission Mid-Term Review of the Capital Markets Union Action Plan

On 8 June 2017, the Commission published its mid-term review of the 2015 Capital Markets Union ("CMU") action plan. The review states that approximately two-thirds of the actions anticipated by the plan have been delivered since its inception. The Commission is now reframing the action plan in response to the results of the recent consultation (which it launched in January 2017 and which was covered in the April 2017 edition of this newsletter) and to other challenges in the market, including the UK's anticipated departure from the single market. The Commission has identified a number of new priority actions, which are:

  • to strengthen the powers of ESMA;
  • to deliver a more proportionate regulatory system for small and medium sized enterprises listing on public markets;
  • to strengthen the EU's leading role in pioneering sustainable investment;
  • to support cross-border investment; and
  • to support the development of local capital market ecosystems. These actions are additional to those already identified still outstanding in the action plan.
  • The responses to the Commission's consultation, which fed into the mid-term review, identified a number of specific challenges faced by the CMU, including:
  • the requirement for more risk finance to support the innovation and growth of start-up and scale-up firms;
  • the small size of public equity and debt markets in some member states relative to other developed economies;
  • the relative cost and complexity of accessing public markets, especially for small and medium sized companies;
  • a general contraction on the amount of new lending to EU business by EU banks since the financial crisis;
  • inadequate investment by insurance companies and pension funds in risk capital, equity and infrastructure;
  • low engagement on the part of retail investors with capital markets; and
  • long-standing obstacles preventing EU cross-border investment. In the Commission's view, it will have made sufficient progress on achieving these measures so as to lay the foundations for a true CMU by 2019. The full text of the Commission's review is available at:

ESMA: Updated Q&A on the Market Abuse Regulation ("MAR")

On 30 May 2017, the European Securities and Markets Authority ("ESMA") published an updated version of its Q&A on MAR. Changes since the last version include:

  • A new question on whether credit institutions are required under MAR to systematically publish the results of their Pillar II assessment in relation to the disclosure of inside information.
  • Confirmation that circumstances surrounding delay of disclosure under Article 17(4) or notification of delay under Article 17(5) will need to be assessed on a case-by-case basis by the relevant issuer.
  • In the context of the Supervisory Review and Evaluation Process to be conducted in accordance with Article 97 of Directive 2013/36/EU, whenever a credit institution subject to the market abuse regime becomes aware of information, notably as a result of a Pillar II assessment, it must evaluate whether such information constitutes inside information; if it does, then MAR provisions apply to the consequential disclosure requirements, and the credit institution must publicly disclose the inside information as early as possible, subject to the MAR provisions on delaying disclosure.
  • A reminder that if any publication, which does not come from the issuer complying with its disclosure obligations, or a rumour in the market, relates explicitly to inside information, the issuer must react and respond to the publication or rumour if it is accurate enough to indicate that the confidentiality of the inside information can no longer be assured. This response should be made publicly available in the same way as communication of inside information and without delay.
  • A new question on whether blanket order cancellation policies issued upon the discovery of a person being in possession of inside information is compliant with the ban on insider dealing under MAR. ESMA's response notes that there is a rebuttable presumption under Article 8(1) of MAR that "the use of inside information by cancelling or amending an order placed before the person concerned possessed inside information" constitutes insider dealing. However, if the cancellation was done without the use of inside information then this will not constitute insider dealing. Whether or not this is the case must be assessed on a case by case basis. The full text of the Q&A is available at:

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