The New EU Market Abuse Regime applies from 3 July 2016
Regulation 596/2014 on market abuse (MAR) and Directive 2014/57/EU on criminal sanctions for market abuse (CSMAD, together with MAR, the New EU Market Abuse Regime) apply in EU Member States from 3 July 2016. The existing EU market abuse regime (i.e. the Market Abuse Directive) will be repealed from that date.
Far-reaching application to exchanges in the EU
The New EU Market Abuse Regime is notable as it extends the scope of existing EU market abuse regulation to issuers of debt securities which are currently listed on EU unregulated markets for the first time including many commonly used exchanges for the listing of Eurobonds, for example, the Global Exchange Market of the Irish Stock Exchange, whereas previously they only applied to securities listed on EU regulated markets.
New administrative obligations for issuers
The implications of the New EU Market Abuse Regime are such that all issuers of securities on a market falling within its scope must ensure that appropriate measures, including policies and procedures, are put in place to ensure compliance, for example in respect of additional disclosure requirements, the preparation of insider lists and reporting of transactions involving persons discharging managerial responsibilities within the issuer (PDMRs) (which can have a de minimis threshold in certain Member States as low as €5,000 to trigger the reporting obligation) and the maintenance of lists of such PDMRs and any associated persons.
Although it is understood that EU exchanges are currently in the process of amending their respective listing rules to comply with the provisions of the new EU Market Abuse Regime, it must be noted that the MAR will be directly applicable in all EU Member States from 3 July 2016 and does not require any domestic implementing legislation and will affect all issuers with securities listed on affected EU exchanges from that date.
The wide ranging scope and additional administrative obligations (together with, in certain cases, the serious potential civil and criminal sanctions) associated with the New EU Market Abuse Regime is likely to be of particular significance for issuers who have traditionally listed debt securities on EU exchanges such as Ireland or Luxembourg in order to qualify as a "recognised stock exchange" to take advantage of the Quoted Eurobond Exemption, thereby enabling for example an issuer within the UK tax net to make payments of interest on listed securities gross without withholding for tax and where those securities are not traded and/or is held by related persons such as intragroup debt.
New EU Market Abuse Regime does not apply to listings on Channel Islands Securities Exchange
Such specialist debt issuers who are concerned by the burdens and obligations which will be imposed upon them by MAR may wish to consider listing those debt securities to The Channel Islands Securities Exchange Authority Limited (the CISEA) under Chapter 8 of the CISEA Listing Rules.
Unlike EU exchanges, the CISEA is not bound by or subject to any EU directives or regulations (including MAR and CSMAD) and therefore is considerably more flexible in its approach. Importantly, the rules and continuing obligations regime applicable to debt securities listings on the CISEA under Chapter 8 are less onerous in comparison to the continuing obligations regimes on many EU-based exchanges and, most notably, do not currently (although this may be reviewed) contain any of the same ongoing administrative obligations imposed under the MAR. It should be noted however that the issuer will still be subject to any other relevant local market abuse and insider dealing legislation.
The CISEA is internationally recognised (for example, as an Affiliate Member of the International Organisation of Securities Commissions) and is recognised by HM Revenue and Customs as a recognised exchange under Section 841 of the UK Income and Corporation Taxes Act 1988, which means that qualifying debt securities listed on the CISEA are eligible for the Quoted Eurobond Exemption. The CISEA is licensed to operate as an investment exchange under the Protection of Investors (Bailiwick of Guernsey) Law 1997 and is regulated and supervised by the Guernsey Financial Services Commission.
Furthermore, the CISEA does not require an issuer to appoint a local paying agent in the Channel Islands and does not typically require securities to be entered into a clearing system. The fees levied by the CISEA for listing debt securities are competitive with other exchanges based in the European Union.
Flexible and pragmatic in disclosure and ongoing obligations
The CISEA recognises that debt securities issued by special purpose vehicles and intra-group holding companies tend to be purchased and traded (if at all) by a limited number of sophisticated, intra-group and/or institutional investors. This, coupled with the fact that the CISEA is not bound by or subject to EU directives or regulation, means that it endeavours to adopt a pragmatic approach to regulation. Disclosure requirements in the listing particulars have been set at a level which is intended to provide investors with sufficient information to make an informed investment decision regarding the listed securities but without imposing unnecessarily onerous demands on an issuer. The CISEA may also authorise the omission of certain information or derogation of certain disclosure provisions if it considers its inclusion to either be of minor importance or if disclosure would be seriously detrimental to the issuer or contrary to the public interest.
As a consequence, the listing particulars form a relatively short document and, where the debt securities are already listed on a recognised stock exchange, which include for example, the Irish Stock Exchange, the London Stock Exchange and the Luxembourg Stock Exchange, the process should be even more streamlined as most of the required disclosures to the CISEA are likely to have been made already in the application to list on the original EU-based exchange.
Ogier Corporate Finance Limited's role – how can we help issuers?
In order to proceed with a listing, a proposed issuer must appoint a sponsor to assist in relation to the listing procedure. The sponsor will be responsible for all communications and dealings with the CISEA (including seeking approval of the CISEA for the form and content of the listing particulars and for the preparation and filing with the CISEA of the formal listing application and supporting documentation). In addition, a sponsor is able to apply to the CISEA for derogations in the formal disclosure requirements applicable to the contents of the listing particulars.
Ogier Corporate Finance Limited (OCFL) is a full listing member of the CISEA and is the market leader in providing listing sponsor services for the listing of debt securities on the CISEA. There are currently over 2,100 listings on the CISEA, which cover equity linked notes, convertible notes, PIK notes, Eurobonds and warrants.
Further information regarding the listing of debt securities on the CISEA and the services provided by OCFL are available on request. If you would like further information about the CISEA, the listing process and the services that we are able to provide, please feel free to get in touch with any of the contacts listed in connection with this briefing.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.