The reform of the Spanish Securities Market Act provides greater clarity and flexibility on market abuse
Commentary Securities Markets 2-2018
The new regulation clarifies the concepts of inside information and relevant information, gives greater flexibility to issuers as regards the dissemination of inside information and broadens the notifications of transactions carried out by their managers.
These amendments have been introduced by the Royal Decree-Law 19/2018, of 23 November, on payment services and other urgent measures of a financial nature (RDL 19/2018) published in the Official State Gazette (BOE) on 24 November 2018.
Final provision nine of RDL 19/2018 amends the recast text of the Securities Market Act, approved by Legislative Royal Decree 4/2015, of 23 October (LMV). Of these amendments, worthy of note are certain options that the Spanish legislation includes, in accordance with the provisions of Regulation (EU) no. 596/2014, of the European Parliament and of the Council, of 16 April 2014, on market abuse and repealing Directive 2003/6/EC of the European Parliament and of the Council and Commission Directives 2003/124/EC, 2003/125/EC and 2004/72/EC (Market Abuse Regulation or MAR), which stand out given their usefulness for the day-to-day operation of listed companies and issuers of securities.
These amendments to the LMV came into force the day after their publication in the BOE.
Clarification of the concepts of inside information and relevant information
Following publication of MAR in 2014, two definitions of “inside information” existed in Spanish law, one contained in Article 7 of MAR and the other, now repealed, in former article 226 of the LMV.
In addition, the now repealed article 228 of the LMV included a definition of “relevant information” which, to some extent, overlapped with the definition of “privileged information” contained in the MAR.
Following the amendments made to the LMV by the RDL 19/2018 these concepts were clarified:
- “Inside information” will be solely what is stated in article 7 of MAR, in particular in accordance with article 7.1.a) “information of a precise nature, which has not been made public, relating, directly or indirectly, to one or more issuers or to one or more financial instruments, and which, if it were made public, would be likely to have a significant effect on the prices of those financial instruments or on the price of related derivative financial instruments.”
- “Relevant information” shall mean, according to the new article 227 of the LMV “the remaining information of a financial or corporate nature concerning the issuer itself or its securities or financial instruments that any legal or regulatory provision obliges them to make public in Spain or that they consider necessary, due to their specific interest, to disseminate among investors.”
Both inside information and relevant information will be the subject matter of public dissemination by the issuers, but only inside information is subject to the obligations of articles 8, 9, 10 and 17 of MAR and its implementing legislation.
There is no need to give the CNMV prior justification of the reasons for the delay in the publication of inside information
Article 17(4) of the MAR Regulation provides that an issuer can delay, at his own responsibility, the public disclosure of inside information, provided that it complies with the conditions contained therein:
- immediate disclosure is likely to prejudice the legitimate interests of the issuer;
- delay of disclosure is not likely to mislead the public; and
- the issuer is able to ensure the confidentiality of that information.
This aspect of MAR is developed by the Commission Implementing Regulation (EU) 2016/1055 of 29 June 2016, laying down technical standards with regard to the technical means for appropriate public disclosure of inside information and for delaying the public disclosure of inside information (Implementing Regulation 2016/1055). Article 4 thereof describes the information that the issuer must keep:
- dates and times when: (i) inside information first existed in the issuer; (ii) the decision to delay the disclosure of inside information was made, and (ii) the issuer is likely to disclose the inside information.
- Identity of the persons within the issuer responsible for: (i) making the decision to delay disclosure and deciding on the start of the delay and its likely end; (ii) guaranteeing the permanent monitoring of the delay conditions; (iii) making the decision to publicly disclose the inside information and (iv) providing the requested information about the delay and the written explanation to the CNMV.
- Evidence of initial compliance with the abovementioned conditions a) to c) of MAR, and any change to that compliance during the delay period, in particular: (i) the barriers established internally with respect to third parties to prevent access to inside information by persons other than those who require it for the normal exercise of their employment, profession or duties within the issuer and (ii) the arrangements put in place to disclose the relevant inside information as soon as possible when confidentiality is no longer guaranteed.
Article 17(4) of the Implementing Regulation 2016/1055 provides that this delay in the disclosure of inside information must be notified to the CNMV immediately after the information has been made public, and the CNMV must be given a written explanation about how the conditions laid down in Article 17(4) have been complied with.
With the modification made by RDL 19/2018 to article 229 of the LMV, in accordance with the provisions of MAR, it was decided not to oblige the issuer to send the justification (“explanation” is the term used in MAR) of the existence of the conditions that allow that delay when the necessary communication of the delay itself is given to the CNMV, except where the latter expressly requests it.
Determination of the notification threshold as regards transactions concerning securities carried out by managers of the issuers
Article 19 of MAR and its implementing regulations lay down, with respect to transactions carried out by managers on their own account concerning shares or debt instruments of that issuer, derivatives or other financial instruments related thereto, the different requirements for carrying out these transactions and the manager’s obligations to notify the issuer and the CNMV. Pursuant to Article 19(8) of MAR, these notification obligations cover any subsequent transaction once a total amount of 5,000 euros has been reached within a calendar year. This threshold applies to managers who are not directors since the latter must notify any transaction.
Pursuant to the powers contained in Article 19(9) of MAR, the RDL 19/2018 inserts a new article 230 of the LMV which raises this threshold for managers (not for directors for whom there is still no threshold) to 20,000 euros.
In addition, new article 230 provides that it is the CNMV’s responsibility to publish these notifications, thereby complying with the obligation of dissemination contained in Article 19(3) of the MAR.