In the last quarter of 2018, ESMA has twice updated its Questions and Answers (“Q&A”) on Regulation (EU) No. 596/2014 of 16 April 2014 on market abuse (the “Market Abuse Regulation”), to provide some more clarification regarding the delay of disclosure of inside information by credit/financial institutions for the purposes of financial stability and to confirm the applicability of the prohibition in Article 19(11) of the Market Abuse Regulation to issuers.
Pursuant to Article 17.5 of the Market Abuse Regulation credit/financial institutions may delay the disclosure of inside information in order to preserve the stability of the financial system, subject to specific conditions laid out in that article. In its October 2018 update of the Q&A, ESMA has elaborated on the elements to be considered by a credit/financial institution when assessing whether those conditions have been met. ESMA also confirmed that credit/financial institutions notifying a national competent authority (“NCA”) of their intention to proceed with a financial stability delay, must also notify that NCA of the expected duration of the delay, and thereafter, of any new element or event that may affect the duration of the delay. Finally, in case of a denial by the NCA of a delay pursuant to Article 17.5 of the Market Abuse Regulation (because the relevant conditions are not met), the credit/financial institution shall be required to immediately disclose the relevant inside information and shall not be permitted to resort to a delay of disclosure pursuant to Article 17(4) of the Market Abuse Regulation.
Pursuant to Article 19(11) of the Market Abuse Regulation, a person discharging managerial responsibilities (“PDMR”) within an issuer shall not conduct any transactions on its own account or for the account of a third party, directly or indirectly, relating to the shares or debt instruments of the issuer, or to derivatives or other financial instruments linked to them during a closed period of 30 calendar days before the announcement of an interim financial report or a year-end report which the issuer is obliged to make public. In its November 2018 update of the Q&A, ESMA has confirmed that this prohibition does not encompass transactions of the issuer relating to its own financial instruments even if it is the PDMRs taking the decision or bringing a previous decision into practice. The reasoning is that in this scenario the PDMR is acting in its capacity as a director of the issuer and therefore the transaction is a transaction of the issuer itself. ESMA takes this opportunity to remind issuers, however, that any transactions carried out by it during a closed period should still be treated with caution given that the prohibition of insider dealing still applies.