Market Abuse Regulation: Update of ESMA Q&A

On 29 March 2019, ESMA updated its Q&A on the Market Abuse Regulation (EU) 596/2014 ("MAR") to include clarifications on Article 17 of MAR and more particularly to clarify that the obligation of an issuer, which has requested or approved admission of its financial instruments to trading on a regulated market, an MTF¹ or an OTF² in an EU Member State, to inform the public as soon as possible of inside information which directly concerns that issuer, applies to Undertakings for Collective Investment ("UCIs") without legal personality (including Luxembourg fonds commun de placement ("FCPs") whilst underlining the fact that the obligations of article 17 of MAR apply to all issuers. As a consequence, it is now clear that MAR applies to all types of UCIs (set up as corporate or non-corporate entities).

The Q&A also sheds some light on the circumstances in which cases of inside information may arise in the context of UCIs.

• According to the Q&A, a UCI without legal personality meets the issuer definition regardless of the fact that the effective issue/redemption of units and any obligations arising from MAR (or any other piece of legislation) are discharged by the relevant asset manager and that in this context the asset manager could be held responsible for a potential infringement of the UCI’s obligation to disclose inside information. In a Luxembourg context, the references to “asset manager” are likely to mean the FCP’s management company.
  
  ESMA helpfully clarifies that the obligation to publish inside information under article 17(1) of MAR only covers issuers that have requested or approved admission of their financial instruments to trading on a regulated market, an MTF or an OTF in an EU Member State which therefore seems to exclude circumstances in which the UCI (or its management company) was not aware that its shares or units have been listed on a stock exchange by a third party. This is corroborated by the wording used in the title of the section itself “Disclosure of inside information by collective investment undertakings without legal personality voluntarily admitted to trading or traded on a trading venue”.
  
  ESMA also recalls that the obligation to publicly disclose inside information under article 17 of MAR is different from other disclosure requirements under the UCITS directive or the AIFM Directive as it strictly refers to cases involving inside information as defined in article 7 of MAR.
   
• The Q&A gives (in Q5.7 and A5.7) a non-exhaustive list of examples of cases where inside information may arise in respect to UCIs (including ETFs³ admitted to trading or traded on a trading venue under article 17 of MAR whilst making it clear that ultimately a final assessment has to be made on a case-by-case basis, and, that the below examples may not constitute inside information in all cases.
  
  The examples include: any situation with significant impact (appreciation or depreciation) on the valuation of the UCI assets and, as a result, on the value of the UCI’s units, cases where the UCI has been affected by fraud, theft or an adverse tax ruling, unexpected circumstances in the creation/redemption of units of a UCI (including any situation under which the UCI cannot issue/redeem its units), events that will directly affect the liquidity of the market in units of an ETF arising from events impacting the entities acting as counterparties in the secondary market, issues related to the total or partial liquidation of the UCI’s assets (such as imminent insolvency or termination of the UCI, or a sub-fund where the UCI is an umbrella fund, partial liquidation of the UCI’s units; modalities and payment terms preceding the liquidation or delisting of the UCI).
  
  ESMA highlights that for real estate UCIs admitted to trading/traded on a trading venue, inside information may also arise in the context of significant events related to the acquisition, sale or management of its real estate assets, including rent renegotiation or possible relevant losses derived from legal disputes.
  
  While the title of this section of the MAR Q&A expressly refers to UCIs without legal personality, there is no reason why the above examples of inside information would not apply to UCIs with legal personality.