In its proposal for a regulation to increase the attractiveness of public capital markets in the EU for companies and to facilitate access to funds for small and medium-sized enterprises, the EU-Commission intends to make it easier for issuers to publish insider information. The proposed amendments to the Market Abuse Regulation (MAR) will not restrict the fundamentally broad definition of insider information itself. However, the scope of the obligation to disclose insider information is to be limited and more legal transparency is to be achieved as to which information must be disclosed. The planned amendments are intended to create legal clarity as to which information must be disclosed in the case of processes, which occur in stages. A process is considered to occur in stages if it has to pass through several decision-making stages. The question then arises as to how these individual intermediate steps are to be treated under insider law.

Facilitation of the Publication Requirement for Processes which Occur in Stages

According to the current version of the MAR, an issuer must immediately disclose to the public insider information directly concerning the issuer. The concept of inside information also covers intermediate steps in processes that occur in stages. An intermediate step in such a process is considered to be insider information if it in itself meets the criteria for inside information. The proposed amendments do not affect the basic approach that intermediate steps can also be considered insider information. Rather, the obligation to publish an interim step is to be restricted. The intended amendments are to stipulate that in the case of a prolonged transaction, the duty to disclose does not apply specifically to the intermediate steps of this transaction. Issuers are to be required to disclose only the information that relates to the event with which a process that occured in stages is to be completed. Since the principle remains that intermediate steps can also constitute independent information, the prohibition of insider trading with such information remains in place.

Tokenized Financial Instruments May Entail Disclosure Obligations Under MAR

MAR’s publication obligation applies to issuers who have applied for or been authorized to have their financial instruments admitted to trading on a regulated market. Financial instruments listed on a multilateral trading facility (MTF) or organized trading facility (OTF) may also give grounds for publication obligations for an issuer. This is the case if the issuer has received a license to trade on the MTF or OTF or has applied for an admission to trading on such a trading system for its financial instruments.  The term “financial instrument” is defined by the MiFID2 Directive. This lists in its annex which instruments are considered financial instruments within the meaning of MiFID2. Transferable securities can be named as the most important MiFID2 financial instrument. The DLT Pilot Regime Regulation explicitly clarified in the MiFID2 Directive that instruments issued by means of distributed ledger technology can also qualify as financial instruments. Accordingly, securitization in a certificate is not necessary. Therefore, if instruments issued by means of distributed ledger technology are listed on a regulated market or on an MTF at the issuer’s initiative, e.g. within the scope of the DLT pilot regime, the issuer may be subject to the corresponding disclosure obligations under MAR.

Atty. Dr. Konrad Uhink