Topic Macroeconomic supervision First Financial Markets Amendment Act
Article from the Annual Report 2016 of the BaFin
The most significant changes in 2016 resulted from the rules on market abuse, with parts of the German First Financial Markets Amendment Act (Erstes Finanzmarktnovellierungsgesetz) entering into force on 1 July 2016. This Act transposes the amended Market Abuse Directive (MAD)1 into German law. The Directive also contains implementing rules for the Market Abuse Regulation (MAR)2, which is directly applicable. In addition, it refers to the Central Securities Depositories Regulation3 as well as the Regulation on key information documents for packaged retail and insurance-based investment products (PRIIPs), or PRIIPs Regulation for short.4
Under the new market abuse rules applicable since July 2016, the main substantive provisions on market integrity and transparency are no longer contained in the German Securities Trading Act (Wertpapierhandelsgesetz). Instead, it is now the MAR which defines which activities fall within the scope of illegal insider trading and market manipulation. By the same token, the MAR contains provisions on accompanying transparency requirements, in particular managers' transactions and ad hoc disclosures.
Substantive changes
In addition to this formal component, the new market abuse regime has also brought about a number of substantive changes. For example, the new requirements now also apply throughout Europe to financial instruments traded only on non-exchange trading platforms, such as multilateral trading facilities (MTFs) and organised trading facilities (OTFs). Under the new legislation, the issuers of these types of financial instruments now also have to publish inside information and prepare the corresponding lists. However, this requirement applies only, if the financial instruments are traded on an MTF or OTF with the issuers' permission. What is more, with immediate effect, the prohibition of market manipulation also applies to benchmarks.
The First Financial Markets Amendment Act has also extended the options for imposing sanctions for prohibited market abuse activities. This means that both insider trading by secondary insiders and attempted market manipulation can be prosecuted as criminal offences. In addition, the upper limits of administrative fines for acts of market abuse have been increased. With immediate effect, BaFin can also base the amount of administrative fines imposed on legal persons on their turnover.5
The First Financial Markets Amendment Act also includes implementing rules for the PRIIPs Regulation6 and the Central Securities Depositories Regulation. The rules relate primarily to assigning responsibilities to BaFin and options to impose sanctions. Under the PRIIPs Regulation, manufacturers of packaged retail investment products have to publish key information documents. The Regulation sets out in detail how the requirements for these sources of information have to be implemented in terms of form and content. By contrast, the Central Securities Depositories Regulation contains Europe-wide harmonised provisions for the authorisation and ongoing supervision of central securities depositories.
Footnotes:
- 1) Directive 2014/57/EU, OJ EU L 173/179.
- 2) Regulation (EU) No 596/2014, OJ EU L 173/1.
- 3) Regulation (EU) No 909/2014, OJ EU L 257/1.
- 4) Regulation (EU) No 1286/2014, OJ EU L 352/1. See First Financial Markets Amendment Act.
- 5) See BaFin's new administrative fine guidelines under the Securities Trading Act and Opinion: Béatrice Freiwald on sanctions and measueres.
- 6) See International developments.
