# EUR-Lex - 52011PC0651 - EN

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# 52011PC0651

**Proposal for a REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL on insider dealing and market manipulation (market abuse) /* COM/2011/0651 final - 2011/0295 (COD) */**

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EXPLANATORY MEMORANDUM

1.
CONTEXT OF THE PROPOSAL

Adopted in early 2003, the Market Abuse
Directive (MAD) 2003/6/EC[1] introduced a
comprehensive framework to tackle insider dealing and market manipulation
practices, jointly referred to as "market abuse". The Directive aims
to increase investor confidence and market integrity by prohibiting those who
possess inside information from trading in related financial instruments, and
by prohibiting the manipulation of markets through practices such as spreading
false information or rumours and conducting trades which secure prices at
abnormal levels.

The importance of market integrity has been
highlighted by the current global economic and financial crisis. In this
context, the Group of Twenty (G20) agreed to strengthen financial supervision
and regulation and to build a framework of internationally agreed high
standards. In line with the G20 findings, the report by the High-Level Group on
Financial Supervision in the EU recommended that "a sound prudential and
conduct of business framework for the financial sector must rest on strong
supervisory and sanctioning regimes"[2].

In its Communication on "Ensuring
efficient, safe and sound derivatives markets: Future policy actions" the
Commission undertook to extend relevant provisions of the MAD in order to cover
derivatives markets in a comprehensive fashion[3]. The
importance of efficient coverage of over the counter (OTC) transactions in
derivatives has been stressed also in discussions at various international fora
including the G20 and IOSCO as well as in the recent US Treasury Financial
Regulatory Reform programme.

Furthermore, the Commission Communication on a
Small Business Act for Europe calls on the Union and Member States to design
rules according to the "think small first principle" by reducing
administrative burdens, adapting legislation to the needs of issuers, whose
financial instruments are admitted to trading on SME growth markets, and
facilitating the access to finance of those issuers[4].
A review of existing sanctioning powers and their practical application aimed
at promoting convergence of sanctions across the range of supervisory
activities has been carried out in the Commission Communication on sanctions in
the financial services sector[5].

The European Commission has assessed the
application of the MAD and has identified a number of problems which have
negative impacts in terms of market integrity and investor protection, lead to
an unlevel playing field and result in compliance costs and disincentives for
issuers, whose financial instruments are admitted to trading on SME growth markets,
to raise capital.

As a result of regulatory, market and
technological developments, gaps in the regulation of new markets, platforms
and over the counter instruments have emerged. Similarly, these same factors
have led to gaps in the regulation of commodities and related derivatives. The
fact that regulators lack certain information and powers, and that sanctions
are either lacking or insufficiently dissuasive, mean that regulators cannot
effectively enforce the Directive. Finally, the existence of numerous options
and discretions in the MAD, as well as a lack of clarity on certain key
concepts, undermines the effectiveness of the Directive.

In light of these problems, this initiative
aims to increase market integrity and investor protection, while ensuring a
single rulebook and level playing field and increasing the attractiveness of
securities markets for capital raising.

2.
RESULTS OF CONSULTATIONS WITH THE INTERESTED PARTIES
AND IMPACT ASSESSMENTS

The initiative is the result of extensive
consultations with all major stakeholders, including public authorities
(governments and securities regulators), issuers, intermediaries and investors.

It takes into consideration the reports
published by the Committee of European Securities Regulators (CESR) on the
nature and extent of the supervisory powers of Member States under the Market
Abuse Directive[6] and on the options and
discretions of the MAD regime used by Member States[7].

It also takes into account a report by the
European Securities Markets Expert Group (ESME)[8] which assesses
the effectiveness of the MAD in achieving its primary objectives, identifies
certain weaknesses and problems and sets out suggested improvements[9].

On 12 November 2008 the European Commission
held a public conference on the review of the market abuse regime[10].
On 20 April 2009, the European Commission launched a call for evidence on the
review of the Market Abuse Directive. The Commission services received 85 contributions.
The non-confidential contributions can be consulted in the Commission website[11].

On 28 June 2010 the Commission launched a
public consultation on the revision of the Directive which closed on 23 July
2010[12]. The Commission services
received 96 contributions. The non-confidential contributions can be consulted
in the Commission website[13]. A summary is found in
Annex 2 to the impact assessment report[14]. On 2 July
2010, the Commission held a further public conference on the review of the
Directive[15].

In line with its "Better Regulation"
policy, the Commission conducted an impact assessment of policy alternatives.
Policy options related to regulation of new markets, platforms and OTC
instruments, commodities and related derivatives, sanctions, powers of
competent authorities, clarification of key concepts and reducing
administrative burdens. Each policy option was assessed against the following
criteria: impact on stakeholders, effectiveness and efficiency. The overall
impact of all the preferred policy options will lead to considerable
improvements in addressing market abuse within the EU.

First of all market integrity and investor
protection will be improved by clarifying which financial instruments and
markets are covered, ensuring that instruments admitted to trading only on a
multilateral trading facility (MTF) and other new types of organised trading
facilities (OTFs) are covered. In addition the preferred options will improve
protection against market abuse through commodity derivatives by improved
market transparency.

In addition they will ensure better detection
of market abuse by offering the necessary powers to competent authorities to
perform investigations and improve the deterrence of sanctioning regimes by
introducing minimum principles for administrative measures or sanctions. The
proposal for a Directive [XX] also requires the introduction of criminal
sanctions.

Furthermore, the preferred options will lead to
a more coherent approach regarding market abuse by reducing options and discretions
for member States and will introduce a proportionate regime for issuers, whose
financial instruments are admitted to trading on SME growth markets.

Overall, the preferred policy options are
expected to contribute to the improved integrity of financial markets which
will have a positive impact on investors' confidence and this will further
contribute to the financial stability of financial markets.

DG MARKT services met the Impact Assessment
Board on 23 February 2011. The Board analysed this Impact Assessment and
delivered its opinion on 25 February 2011. During this meeting the members of
the Board provided DG MARKT services with comments to improve the content of
the Impact Assessment that led to some modifications to the text. These are:

–
Clarification of how the performance of the
existing legislation has been evaluated and how the evaluation results have
informed the analysis of the problem;

–
The addition of evidence-based estimates of the
overall damage to the European economy as a consequence of abusive practices in
the markets under consideration, and of the estimated overall benefits of the
preferred policy options, with the necessary caveats regarding the
interpretation of these estimates;

–
Clarification in the baseline scenario of how
other related financial regulations complement the Market Abuse Directive;

–
Clarification of the content of certain policy
options and improved presentation of the packages of preferred options, as well
as an assessment of the overall impacts of the packages of preferred options,
taking into account synergies or trade-offs between different options where
they exist;

–
A more proportionate analysis of the most costly
measures in the assessment of the administrative burdens and costs;

–
The addition in the main text of more clearly
visible, concise summaries of the assessment of impacts of policy options in
terms of fundamental rights, especially in the areas of investigative powers
and sanctions;

–
An improved justification of why the
approximation of criminal law is essential for an effective EU policy on market
abuse, based on studies and evidence from Member States about the effectiveness
of criminal sanctions, as well as a summary of the responses to the Commission
Communication on reinforcing sanctioning regimes in the financial services
sector; and

–
A clearer presentation in the main text of the
views of stakeholders, including institutional and individual investors, on the
policy options.

3.
LEGAL ELEMENTS OF THE PROPOSAL
3.1.
Legal basis

The proposal is based on Article 114 TFEU as
the most appropriate basis for a Regulation in this field. A Regulation is
considered to be the most appropriate legal instrument to define the market
abuse framework in the Union. The direct applicability of a Regulation will
reduce regulatory complexity and offer greater legal certainty for those
subject to the legislation across the Union introducing a harmonised set of
core rules and contributing to the functioning of the Single Market.

3.2.
Subsidiarity and proportionality

According to the principle of subsidiarity
(Article 5.3 TFEU), action at Union level should be taken only when the aims
envisaged cannot be achieved sufficiently by Member States alone and can
therefore, by reason of the scale or effects of the proposed action, be better
achieved by the Union. Although all the problems outlined above have important
implications for each individual Member State, their overall impact can only be
fully perceived in a cross-border context. This is because market abuse can be
carried out wherever that instrument is listed, or over the counter, so even in
markets other than the primary market of the instrument concerned. Therefore
there is a real risk of national responses to market abuse being circumvented
or ineffective in the absence of action at the Union level.

Further, a consistent approach is essential in
order to avoid regulatory arbitrage and since this issue is already covered by
the acquis of the existing MAD addressing the problems highlighted above can
best be achieved in a common effort. Against this background the Union action
appears appropriate in terms of the principle of subsidiarity.

The principle of proportionality requires that
any intervention is targeted and does not go beyond what is necessary to
achieve the objectives. This principle has guided the process from the
identification and evaluation of alternative policy options to the drafting of
this proposal.

3.3.
Compliance with Articles 290 and 291 TFEU

On 23 September 2009, the Commission adopted
proposals for Regulations establishing EBA, EIOPA, and ESMA[16].
In this respect the Commission wishes to recall the Statements in relation to
Articles 290 and 291 TFEU it made at the adoption of the Regulations
establishing the European Supervisory Authorities according to which: "As
regards the process for the adoption of regulatory standards, the Commission
emphasises the unique character of the financial services sector, following
from the Lamfalussy structure and explicitly recognised in Declaration 39 to
the TFEU. However, the Commission has serious doubts whether the restrictions
on its role when adopting delegated acts and implementing measures are in line with
Articles 290 and 291 TFEU."

3.4.
Detailed explanation of the proposal
3.4.1.
Chapter I (General Provisions)
3.4.1.1.
Regulation of new markets, trading facilities
and OTC financial instruments

The MAD is based on the concept of prohibiting
insider dealing or market manipulation in financial instruments which are
admitted to trading on a regulated market. However, since the adoption of MiFID[17],
financial instruments have been increasingly traded on MTFs, on other types of
OTFs, such as swap execution facilities or broker crossing systems, or only
traded OTC. These new trading venues and facilities have provided more
competition to existing regulated market, gaining an increased share of
liquidity and attracting a broader ranger of investors. The increase in trading
across different venues had made it more difficult to monitor for possible
market abuse. Therefore the Regulation extends the scope of the market abuse
framework applying to any financial instrument admitted to trading on a MTF or an
OTF, as well as to any related financial instruments traded OTC which can have
an effect on the covered underlying market. This is necessary to avoid any
regulatory arbitrage among trading venues, to ensure that the protection of
investors and the integrity of markets are preserved on a level playing field
in the entire Union, and to ensure that the market manipulation of such
financial instruments through derivatives traded OTC, such as CDS, is clearly
prohibited.

3.4.1.2.
Regulation of commodity derivatives and the
related spot commodity contracts

Spot markets and related derivative markets are
highly interconnected and market abuse may take place across these markets.
This raises special concerns for spot markets because the existing rules on
transparency and market integrity only apply to financial and derivative
markets and not to the related spot markets. The purpose of the Regulation is
not to govern directly those spot markets. Indeed, any transaction or behaviour
strictly within those non-financial markets should be outside the scope of this
Regulation and be subject to specific and sectoral regulation and supervision
as provided for in the field of energy by the proposal of the Commission for a
Regulation on energy market integrity and transparency (REMIT)[18].
However, the Regulation should cover the transactions or behaviours in those
spot markets which are related to and have an effect on financial and
derivative markets which are within its scope. In particular, under the current
MAD the lack of a clear and binding definition of inside information in
relation to commodity derivative markets may allow information asymmetries in
connection with those related spot markets. This means that, under the current
market abuse framework, investors in commodity derivatives may be less
protected than investors in derivatives of financial markets because a person
could benefit from inside information in a spot market by trading on a related
derivative market. For this reason the definition of inside information in
relation to commodity derivatives should be aligned to the general definition
of inside information extending it to price sensitive information which is
relevant to the related spot commodity contract as well as to the derivative
itself. This will ensure legal certainty and better information for investors.
Moreover, the MAD only prohibits any manipulation which distorts the price of
financial instruments. As certain transactions in the derivatives markets can
also be used to manipulate the price of the related spot markets, and
transactions in the spot markets can be used to manipulate derivatives markets,
the definition of market manipulation should be extended in the Regulation to
also capture these types of cross-market manipulation. In the specific case of
wholesale energy products, the competent authorities
and ESMA shall cooperate with ACER and the national regulatory authorities of
the Member States to ensure that a coordinated approach is taken to the
enforcement of the relevant rules relating to financial instruments and
wholesale energy products. In particular, the competent
authorities should take into account the specific characteristics of the
definitions of [Regulation (EU) No...of the European Parliament and the Council
on Wholesale Energy Market Integrity and Transparency] when they apply the
definitions of the inside information, insider dealing and market manipulation
of this Regulation to financial instruments related to wholesale energy
products.

3.4.1.3.
Market Manipulation through algorithmic and high
frequency trading

Financial markets are experiencing a widespread
increase in the use of automated trading methods such as algorithmic trading or
high frequency trading. Such trading involves computer algorithms deciding on
whether an order is placed and/or on aspects of the execution of the order. A
specific type of algorithmic trading is known as high frequency trading (HFT).
HFT is typically not a strategy in itself but the use of very sophisticated
technology to implement traditional trading strategies such as arbitrage and
market making strategies. While most algorithmic and HFT strategies are
legitimate there are particular automated strategies that have been identified
by regulators which, if carried out, are likely to constitute market abuse. For
example, this includes strategies such as quote stuffing, layering and
spoofing. The definition of market manipulation in the MAD is very broad and
already capable of applying to abusive behaviour no matter what medium is used
for trading. However, it is appropriate to specify further in the Regulation
specific examples of strategies using algorithmic trading and high frequency
trading that fall within the prohibition against market manipulation. Further
identifying abusive strategies will ensure a consistent approach in monitoring
and enforcement by competent authorities.

3.4.1.4.
Attempt at market manipulation

As the MAD does not cover attempts at market
manipulation, proving market manipulation requires a regulator to demonstrate
that either an order was placed or a transaction was executed. However, there
are situations where a person takes steps and there is clear evidence of an
intention to manipulate the market but either an order is not placed, or a
transaction is not executed. The Regulation expressly prohibits attempts at
market manipulation, which will enhance market integrity. The existing
definition of insider dealing already contained elements of attempted
behaviour. These will be removed and attempted insider dealing will be qualified
as a separate offence.

3.4.1.5.
Emission allowances

Emission allowances will be reclassified as
financial instruments as part of the review of the Markets in Financial
Instruments Directive. As a result, they will also fall into the scope of the
market abuse framework. While most measures under the market abuse regime would
apply without adaptation to the emission allowances, a few provisions will need
to be adjusted in consideration of the specific nature
of these instruments and structural features of this market. In particular,
unlike for most classes of financial instruments, inside information disclosure
as well as duties related to insider lists and managers transactions cannot be
effectively addressed to the issuer of emission allowances that holds
responsibilities for development and implementation of Union's climate
policies. The public authorities in charge (including
the Commission) are anyhow obliged to ensure fair and non-discriminatory disclosure
of and access to new decisions, developments and data. Moreover,
in their pursuit of Union's climate policy, the Member States, the European
Commission as well as other officially designated bodies should not be limited
by the duties set by the market abuse regime.

Therefore, a specific definition of inside
information for emission allowances is introduced. The obligation to disclose
inside information will be placed on the participants in the emission allowance
market, as it is them who will hold the relevant information suitable for
ad-hoc or periodic disclosure. A threshold (expressed in terms of emissions or
thermal input or a combination thereof) defined in a delegated act would remove
from the scope of the obligation under Art. 12 (and also Articles 13 and 14)
all those entities, the activity of which on an individual basis may have no
material impact on the price formation of emission allowances or the
(consequential) risks of insider dealing.

Finally, due to classification of emission allowances
as financial instruments under the MiFID it is possible to put all market abuse
measures concerning the auctioning of emission allowances in a single rulebook
and jointly with the general regime against market abuse for the secondary
market.

3.4.2.
Chapter II (Insider Dealing and Market
Manipulation)
3.4.2.1.
Inside information

Inside information can be abused before an
issuer is under the obligation to disclose it. The state of contract
negotiations, terms provisionally agreed in contract negotiations, the possibility
of the placement of financial instruments, conditions under which financial
instruments will be marketed, or provisional terms for the placement of
financial instruments may be relevant information for investors. Therefore,
such information should qualify as inside information. However, such
information may not be sufficiently precise for the issuer to be under an
obligation to disclose it. In such cases, the prohibition against insider
dealing should apply, but the obligation on the issuer to disclose the
information should not.

3.4.2.2.
Level playing field among trading venues and
facilities in the prevention and detection of market abuse

The increasing trading of instruments across
different venues makes it more difficult to monitor for possible market abuse.
According to the MiFID, MTFs can be operated by market operators or investment
firms. The monitoring obligations in Article 26 of the MiFID apply to them
alike. However, the obligation in Article 6 of the MAD to adopt structural
provisions aimed at preventing and detecting market manipulation practices only
applies to market operators. The Regulation aims to ensure a level playing
field among all trading venues and facilities within its scope by requiring
them to adopt the necessary structural provisions aimed at preventing and
detecting market manipulation practices.

3.4.3.
Chapter III (Disclosure Requirements)
3.4.3.1.
Public disclosure of inside information
3.4.3.2.
Article 6(1) of the MAD requires that issuers of
financial instruments inform the public as soon as possible of inside
information which directly concerns those issuers. Paragraph 2 allows those
issuers under specific conditions to delay the public disclosure. Under the
Regulation, issuers will be required to inform the competent authorities of
their decision to delay the disclosure of inside information immediately after
such a disclosure is made. The responsibility for assessing whether such delay
is justified remains with the issuer. The possibility for the competent
authorities where appropriate to investigate ex post whether in fact the
specific conditions for the delay were met will increase investor protection
and market integrity. However, if inside information is of systemic importance
and it is in the public interest to delay its publication, the competent
authorities will have the power to permit such a delay for a limited period in
the wider public interest of maintaining the stability of the financial system
and avoiding the losses which could result for example from the failure of a
systemically important issuer. Insiders' lists

Insiders' lists are an important tool for
competent authorities when investigating possible market abuse. The Regulation
aims to eliminate national differences which have imposed so far unnecessary
administrative burdens on issuers, by providing that the precise data to be
included in such lists should be defined in delegated acts and implementing
technical standards adopted by the Commission.

3.4.3.3.
Disclosure requirements for issuers whose
financial instruments are admitted to trading on SME growth markets

Without prejudice to the objectives of
preserving the integrity and transparency of financial markets and of
protecting investors, the market abuse framework is adapted to the
characteristics and needs of issuers, whose financial instruments are admitted
to trading on SME growth markets. Applying the new market abuse framework of
the Regulation in an undifferentiated manner to all SME growth markets may
deter issuers on those markets from raising capital on the capital markets. The
scope and size of the business of those issuers is more restricted and the
events giving rise to the need to disclose inside information are typically
more limited than those of larger issuers. The Regulation requires those
issuers to disclose inside information in a modified and simplified
market-specific way. Such inside information may be published by those SME growth
markets, on behalf of those issuers, in accordance with a standardised content
and format defined in implementing technical standards adopted by the
Commission. Those issuers are also exempt, under certain conditions, from the
obligation to keep and constantly update insiders' lists, and benefit from the
new threshold for the reporting of manager's transactions mentioned below.

3.4.3.4.
Reporting of manager's transactions

The Regulation clarifies the scope of the
reporting obligations in relation to manager's transactions. These reports
serve important purposes by deterring managers from insider trading and
providing useful information to the market about the manager's view on the
price movements of the shares of the issuers. The Regulation clarifies that any
transaction made by a person exercising discretion on behalf of a manager of an
issuer or whereby the manager pledges or lends his shares must also be reported
to the competent authorities and be made accessible to the public. Moreover, it
introduces a threshold of EUR 20 000, uniform in all Member States, which
triggers the obligation to report such manager's transactions.

3.4.4.
Chapter IV (ESMA and Competent Authorities)
3.4.4.1.
Powers of Competent Authorities

Under Article 12(2)(b) of the MAD, competent
authorities have the power to demand information from any person. However,
there is an information gap for spot commodity markets, where there are no transparency
rules or reporting obligations to sectoral regulators, when they exist. The
power to request information from any person typically allows competent
authorities access to all information needed to investigate suspicions of
possible market abuse. But this information may not be sufficient in particular
if there is no sectoral authority to supervise these spot commodity markets.
The Regulation allows competent authorities access to continuous data by
requiring such data to be directly submitted to them in a specified format. By
gaining access to spot commodity market traders' systems, competent authorities
are also able to monitor real-time data flows.

For the purpose of detecting cases of insider
dealing and market manipulation, it is necessary for competent authorities to
have the possibility to have access to private premises and seize documents.
The access to private premises is necessary in particular where: (i) the person
to whom a demand for information has already been made fails (wholly or in
part) to comply with it; or (ii) where there are reasonable grounds for
believing that if a demand were to be made, it would not be complied with, or
that the documents or information to which the information requirement relates,
would be removed, tampered with or destroyed. While currently all jurisdictions
provide for access to any document, not all competent authorities have the
power to enter private premises and seize documents. As a result, the risk
exists that competent authorities in such cases are deprived from important and
necessary evidence, and accordingly, cases of insider dealing and market
manipulation might remain undetected and unsanctioned. In this context, it is
important to point out that such access to private premises might constitute an
interference with the fundamental rights to private and family life as
recognized respectively by Article 7 of the Charter of Fundamental Rights of the
European Union. It is essential that any limitation thereof be fully compatible
with Article 52 of the Charter. Therefore, the competent authority of a Member
State should have the power to enter private premises in order to seize
documents only after having obtained prior authorisation from the judicial
authority of that Member State concerned in accordance with national law, and
where a reasonable suspicion exists that documents related to the subject-matter
of the inspection may be relevant to prove a case of insider dealing or market
manipulation in violation of this Regulation or Directive [new MAD]. The
prohibitions against insider dealing and market manipulation apply to all
persons. Therefore, the competent authorities need to have access to
information held, not just by investment firms, but by those persons themselves
and to information regarding those persons' behaviour held in databases by
non-financial companies. Existing telephone and data traffic records from
investment firms executing transactions, and existing telephone and data traffic
records from telecom operators constitute important evidence to detect and
prove the existence of insider dealing and market manipulation. Telephone and
data traffic records may establish the identity of a person responsible for the
dissemination or false or misleading information. Most forms of insider dealing
or market manipulation involve the actions of two or more people, transferring
information or coordinating their activities. Telephone and data traffic
records may establish that a relationship exists between a person who has
access to inside information and the suspicious trading activity of another, or
to establish a link between two persons' collusive trading activity. In
particular, access to telephone and data traffic records from telecom operators
is considered among the most important issues for the accomplishment of the
investigatory and enforcement tasks of CESR members.[19] Indeed, access to telephone and data traffic
records held by telecom operators is an important and sometimes even the sole piece
of evidence to establish whether inside information has been transferred from a
primary insider to someone trading with this inside information. For example,
this data would represent evidence in a case where a board member of a company
in possession of inside information transfers inside information by phone to a
friend, relative or family member who afterwards executes a suspicious
transaction based on the inside information received. The telephone and data traffic
records from telecom operators could be used by the regulator to demonstrate
that a call had been placed by the primary insider to their friend or relative
shortly before that person then called their broker to instruct them to make a
suspicious transaction. The telephone and data traffic records from telecom
operators would provide evidence of a link which could be used as evidence to
sanction the case which otherwise would never be detected. Another example is a
case where a false or misleading message is posted on
an internet bulletin board to affect the price of a financial instrument. Telephone
and data traffic records can serve to identify the author of the message. In
addition, such records can provide evidence of a link with another person who
made prior or subsequent suspicious transactions in order to prove market
manipulation by the dissemination of false or misleading information. In this
context, it is important to introduce a level playing field in the internal
market in relation to the access by competent authorities to telephone and existing data traffic records held
by a telecommunication operator or by an investment
firm. Therefore, competent authorities should be able to require existing
telephone and existing data traffic records held by a
telecommunication operator or by an investment firm,
where a reasonable suspicion exists that such records related to the
subject-matter of the inspection may be relevant to prove insider dealing or
market manipulation as defined in this Regulation or in the [new MAD]. It
should also be clear that these records shall however not concern the content
of the communication to which they relate.

As market abuse can take place across borders
and different markets, ESMA has a strong coordination role and competent
authorities are required to cooperate and exchange information with other
competent authorities and, when applicable to commodity derivatives, with the
regulatory authorities responsible for the related spot markets, within the
Union and in third countries.

3.4.5.
Chapter V (Administrative sanctions)
3.4.5.1.
Sanctions

Financial markets are increasingly integrated
in the Union and offenses can have cross-borders effects in the Union. The
existing divergent sanctioning regimes among Member States foster regulatory
arbitrage and impair the ultimate objectives of market integrity and
transparency within the Single Market for financial services. A stocktaking of
the national regimes in place has, for example, revealed that the levels of
pecuniary sanctions vary widely among Member States, that some competent
authorities do not have certain important sanctioning powers at their disposal
and that some competent authorities cannot address sanctions at natural and
legal persons.[20] Therefore, this
Regulation introduces minimum rules for administrative measures, sanctions and
fines. This does not prevent individual Member States from fixing higher
standards. The Regulation provides for the disgorgement of any profits where
identified, including interests, and, in order to ensure an appropriate
deterrent effect, it introduces fines which must exceed any profit gained or loss
avoided as a result of the violation of this Regulation, and must be determined
by the competent authorities in light of the facts and circumstances.

Moreover, criminal sanctions have a stronger
deterrent effect than administrative measures and sanctions. The proposal for a
Directive [XX] introduces the requirement for all Member States to put in place
effective, proportionate and dissuasive criminal sanctions for the most serious
insider dealing and market manipulation offences. That Directive is to be
applied taking into account the provisions established in this Regulation,
including prospective implementing measures. However, the definitions used for
the purposes of the Directive may differ from the ones used for the purposes of
this Regulation.

3.4.5.2.
Protection and incentives for whistleblowers

Whistle blowing can be a useful source of
primary information and may alert competent authorities to cases of suspected
market abuse. The Regulation enhances the market abuse framework in the Union
introducing appropriate protection for whistleblowers reporting suspected
market abuse, the possibility of financial incentives for persons who provide
competent authorities with salient information that leads to a monetary
sanction, and enhancements of Member States' provisions for receiving and
reviewing whistleblowing notifications.

4.
BUDGETARY IMPLICATION

The specific budget implications of the
proposal relate to task allocated to ESMA as specified in the legislative
financial statements accompanying this proposal. Specific budgetary
implications for the Commission are also assessed in the financial statement
accompanying this proposal.

The proposal has implications for the Community
budget.

2011/0295 (COD)

Proposal for a

REGULATION OF THE EUROPEAN PARLIAMENT
AND OF THE COUNCIL

on insider dealing and market manipulation
(market abuse)

(Text with EEA relevance)

THE EUROPEAN PARLIAMENT AND THE
COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty on the
Functioning of the European Union, and in particular Article 114 thereof,

Having regard to the proposal from the
European Commission[21],

After transmission of the draft legislative
act to the national Parliaments,

Having regard to the opinion of the
European Economic and Social Committee[22],

Having regard to the opinion of the European
Central Bank[23],

Having regards to the opinion of the
European Data Protection Supervisor,

Acting in accordance with the ordinary
legislative procedure,

Whereas:

(1)
A genuine single market for financial services
is crucial for economic growth and job creation in the Union.

(2)
An integrated and efficient financial market
requires market integrity. The smooth functioning of securities markets and
public confidence in markets are prerequisites for economic growth and wealth.
Market abuse harms the integrity of financial markets and public confidence in
securities and derivatives.

(3)
Directive 2003/6/EC[24]
of the European Parliament and the Council on insider dealing and market
manipulation (market abuse), adopted on 28 January 2003, completed and updated
the Union's legal framework to protect market integrity. However, given the
legislative, market and technological developments since then that have
resulted in considerable changes to the financial landscape, that Directive
should now be replaced to ensure that it keeps pace with these developments. A
new legislative instrument is also needed to ensure uniform rules and clarity
of key concepts and to ensure a single rulebook in line with the conclusions of
the High Level Group on Financial Supervision[25].

(4)
There is a need to establish a uniform framework
in order to preserve market integrity and to avoid potential regulatory
arbitrage as well as to provide more legal certainty and less regulatory
complexity for market participants. This directly applicable legal act aims at
contributing in a determining manner to the smooth functioning of the internal
market and should, consequently, be based on the provisions of Article 114
TFEU, as interpreted in accordance with the consistent case-law of the Court of
Justice of the European Union.

(5)
In order to remove the remaining obstacles to
trade and significant distortions of competition resulting from divergences
between national laws and to prevent any further likely obstacles to trade and
significant distortions of competition from arising, it is therefore necessary
to adopt a Regulation establishing uniform rules applicable in all Member
States. Shaping market abuse requirements in the form of a Regulation should
ensure that those requirements will be directly applicable. This should ensure
uniform conditions by preventing diverging national requirements as a result of
the transposition of a directive. This Regulation should entail that all
persons follow the same rules in all the Union. A Regulation should also reduce
regulatory complexity and firms' compliance costs, especially for firms
operating on a cross-border basis, and contribute to eliminating competitive
distortions.

(6)
The Commission Communication on "A Small
Business Act for Europe"[26] calls on the Union and its
Member States to design rules in order to reduce administrative burdens, to adapt
legislation to the needs of issuers on markets for small and medium sized
enterprises and to facilitate the access to finance of those issuers. A number
of provisions in Directive 2003/6/EC impose administrative burdens on issuers,
notably those whose financial instruments are admitted to trading on SME growth
markets, that should be reduced.

(7)
Market abuse is the concept that encompasses all
unlawful behaviour in the financial markets and for the purposes of this
Regulation it should be understood to consist of insider dealing or the misuse
of inside information and market manipulation. Such behaviours prevent full and
proper market transparency, which is a pre requisite for trading for all
economic actors in integrated financial markets.

(8)
The scope of Directive 2003/6/EC focused on
financial instruments admitted to trading on regulated markets but in recent
years financial instruments have been increasingly traded on multilateral
trading facilities (MTFs). There are also financial instruments which are only
traded on other types of organised trading facilities (OTFs) such as broker
crossing systems or only traded over the counter. The scope of this Regulation
should therefore be extended to include any financial instrument traded on a
MTF or an OTF, as well as financial instruments traded over the counter, such
as for example credit default swaps, or any other conduct or action which can
have an effect on such a financial instrument traded on a regulated market, MTF
or OTF. This should improve investor protection, preserve the integrity of
markets and ensure that market manipulation of such instruments through
financial instruments traded over the counter is clearly prohibited.

(9)
Stabilisation of financial instruments or
trading in own shares in buy-back programmes can be legitimate, in certain
circumstances, for economic reasons and should not, therefore, in themselves be
regarded as market abuse.

(10)
Member States and the European System of Central
Banks, the European Financial Stability Facility, national central banks and
other agencies or special purpose vehicles of one or several Member States as
well as the Union and certain other public bodies should not be restricted in
carrying out monetary, exchange-rate or public debt management or climate policy.

(11)
Reasonable investors base their investment
decisions on information already available to them, that is to say, on ex ante
available information. Therefore, the question whether, in making an investment
decision, a reasonable investor would be likely to take into account a
particular piece of information should be appraised on the basis of the ex ante
available information. Such an assessment has to take into consideration the
anticipated impact of the information in light of the totality of the related
issuer's activity, the reliability of the source of information and any other
market variables likely to affect the financial instruments, the related spot
commodity contracts, or the auctioned products based on the emission allowances
in the given circumstances.

(12)
Ex post information may be used to check the
presumption that the ex ante information was price sensitive, but should not be
used to take action against persons who drew reasonable conclusions from ex
ante information available to them.

(13)
Legal certainty for market participants should
be enhanced through a closer definition of two of the elements essential to the
definition of inside information, namely the precise nature of that information
and the significance of its potential effect on the prices of the financial instruments, the related spot
commodity contracts, or the auctioned products based on the emission allowances.
For derivatives which are wholesale energy products, notably information
required to be disclosed according to Regulation [Regulation (EU) No...of the
European Parliament and the Council on Wholesale Energy Market Integrity and
Transparency] should be considered as inside information.

(14)
Inside information can be abused before an
issuer is under the obligation to disclose it. The state of contract
negotiations, terms provisionally agreed in contract negotiations, the possibility
of the placement of financial instruments, conditions under which financial
instruments will be marketed, or provisional terms for the placement of
financial instruments may be relevant information for investors. Therefore,
such information should qualify as inside information. However, such
information may not be sufficiently precise for the issuer to be under an
obligation to disclose it. In such cases, the prohibition against insider
dealing should apply, but the obligation on the issuer to disclose the
information should not.

(15)
Spot markets and related derivative markets are
highly interconnected and global, and market abuse may take place across
markets as well as across borders. This is true for both insider dealing and
market manipulation. In particular, inside information from a spot market can
benefit a person trading on a financial market. Therefore, the general
definition of inside information in relation to financial markets and commodity
derivatives should also apply to all information which is relevant to the
related commodity. Moreover, manipulative strategies can also extend across
spot and derivatives markets. Trading in financial instruments, including
commodity derivatives, can be used to manipulate related spot commodity
contracts and spot commodity contracts can be used to manipulate related
financial instruments. The prohibition of market manipulation should capture
these interlinkages. However, it is not appropriate or practicable to extend
the scope of the Regulation to behaviour that does not involve financial
instruments, for example, to trading in spot commodity contracts that only affects
the spot market. In the specific case of wholesale energy products, the
competent authorities should take into account the specific characteristics of
the definitions of [Regulation (EU) No...of the European Parliament and the
Council on Wholesale Energy Market Integrity and Transparency] when they apply
the definitions of the inside information, insider dealing and market
manipulation of this Regulation to financial instruments related to wholesale
energy products.

(16)
As a consequence of the classification of
emission allowances as financial instruments as part of the review of the
Markets in Financial Instruments Directive, those instruments will also come
within the scope of this Regulation. Bearing in mind the specific nature of
those instruments and structural features of the carbon market, it is necessary
to ensure that the activity of Member States, the European Commission and other
officially designated bodies involving emission allowances is not restricted in
the pursuit of the Union's climate policy. Moreover, the duty to disclose
inside information needs to be addressed to the participants in that market in
general. Nevertheless, in order to avoid exposing the market to reporting that
is not useful and as well as to maintain cost-efficiency of the measure
foreseen, it appears necessary to limit the regulatory impact of that duty to
only those EU ETS operators, that – by virtue of their size and activity – can
reasonably be expected to be able to have a significant effect on the price of
emission allowances. Where emission allowance market participants already
comply with equivalent inside information disclosure duties, notably pursuant
to Regulation on energy market integrity and transparency (Regulation (EU)
No...of the European Parliament and the Council on Wholesale Energy Market
Integrity and Transparency), the obligation to disclose inside information
concerning emission allowances should not lead to the duplication of mandatory
disclosures with substantially the same content.

(17)
Commission Regulation (EU) No 1031/2010 of 12
November 2010 on the timing, administration and other aspects of auctioning of
greenhouse gas emission allowances pursuant to Directive 2003/87/EC of the
European Parliament and the Council establishing a scheme for greenhouse gas
emission allowances trading within the Community[27] provided for two parallel market abuse
regimes applicable to the auctions of emission allowances. However, as a
consequence of the classification of emission allowances as financial
instruments, this Regulation should constitute a single rulebook of market
abuse measures applicable to the entirety of the primary and secondary market
in emission allowances. The Regulation shall also apply to the auctioning of
emission allowances or other auctioned products based thereon pursuant to
Commission Regulation No 1031/2010 of 12 November 2010 on the timing,
administration and other aspects of auctioning of greenhouse gas emission
allowances pursuant to Directive 2003/87/EC of the European Parliament and the
Council establishing a scheme for greenhouse gas emission allowances trading
within the Community

(18)
This Regulation should provide measures regarding
market manipulation that are capable of being adapted to new forms of trading
or new strategies that may be abusive. To reflect the fact that trading of
financial instruments is increasingly automated, it is desirable that market
manipulation should be supplemented by examples of specific abusive strategies
that may be carried out by algorithmic trading including high frequency
trading. The examples provided are neither intended to be exhaustive nor are
they intended to suggest that the same strategies carried out by other means
would not also be abusive.

(19)
In order to complement the prohibition of market
manipulation, this Regulation should include a prohibition against attempting
to engage in market manipulation, given that failed attempts to manipulate the
market should also be sanctioned. The attempt to engage in market manipulation
should be distinguished from situations where behaviour does not have the
desired effect on the price of a financial instrument. Such behaviour is
considered to be market manipulation because it was likely to give false or
misleading signals.

(20)
This Regulation should also clarify that engaging
in market manipulation or attempting to engage in market manipulation in a
financial instrument may take the form of using related financial instruments
such as derivative instruments that are traded on another trading venue or over
the counter.

(21)
In order to ensure uniform market conditions
between trading venues and facilities subject to this Regulation, operators of
regulated markets, MTFs and OTFs should be required to adopt proportionate
structural provisions aimed at preventing and detecting market manipulation
practices.

(22)
Manipulation or attempted manipulation of financial
instruments may also consist in placing orders which may not be executed.
Further, a financial instrument may be manipulated through behaviour which
occurs outside a trading venue. Therefore, persons who professionally arrange
or execute transactions and are required to have systems in place to detect and
report suspicious transactions should also report suspicious orders and
suspicious transactions that take place outside a trading venue.

(23)
Manipulation or attempted manipulation of
financial instruments may also consist in disseminating false or misleading
information. The spreading of false or misleading information can have a
significant impact on the prices of financial instruments in a relatively short
period of time. It may consist in the invention of manifestly false
information, but also the wilful omission of material facts, as well as the
knowingly inaccurate reporting of information. This form of market manipulation
is particularly harmful to investors, because it causes them to base their
investment decisions on incorrect or distorted information. It is also harmful
to issuers, because it reduces the trust in the available information related
to them. A lack of market trust can in turn jeopardise an issuer's ability to
issue new financial instruments or to secure credit from other market
participants in order to finance its operations. Information spreads through
the market place very quickly. As a result, the harm to investors and issuers
may persist for a relatively long-time until the information is found to be
false or misleading, and can be corrected by the issuer or those responsible
for its dissemination. It is therefore necessary to qualify the spreading of
false or misleading information, including rumours and false or misleading
news, as being a breach of this Regulation. It is therefore appropriate not to allow those active in the
financial markets to freely express information contrary to their own opinion or
better judgement, which they know or should know to be false or misleading, to
the detriment of investors and issuers.

(24)
The prompt public disclosure of inside
information by an issuer is essential to avoid insider trading and ensure that
investors are not mislead. Issuers should therefore be required to inform the
public as soon as possible of inside information, unless a delay would not be
likely to mislead the public and the issuer is able to ensure the
confidentiality of the information.

(25)
At times, where a financial institution is
receiving emergency lending assistance, it may be in the best interest of
financial stability for the disclosure of inside information to be delayed when
the information is of systemic importance. It should therefore be possible for
the competent authority to authorise a delay in the disclosure of inside
information.

(26)
The requirement to disclose inside information
can be burdensome for issuers, whose financial instruments are admitted to
trading on SME growth markets, given the costs of monitoring information in
their possession and seeking legal advice about whether and when information
needs to be disclosed. Nevertheless, prompt disclosure of inside information is
essential to ensure investor confidence in those issuers. Therefore, the European
Securities and Markets Authority (ESMA) should be able to issue guidelines
which assist issuers to comply with the obligation to disclose inside
information without compromising investor protection.

(27)
Insider lists are an important tool for regulators
when investigating possible market abuse, but national differences in regards
to data to be included in those lists impose unnecessary administrative burdens
on issuers. Data fields required for insider lists should therefore be uniform
in order to reduce those costs. The requirement to keep and constantly update
insider lists imposes administrative burdens specifically on issuers on SME growth
markets. As competent authorities are able to exercise effective market abuse
supervision without having those lists available at all times for those issuers
they should be exempt from this obligation in order to reduce the
administrative costs imposed by this Regulation.

(28)
Greater transparency of transactions conducted
by persons discharging managerial responsibilities at the issuer level and,
where applicable, persons closely associated with them, constitutes a
preventive measure against market abuse. The publication of those transactions
on at least an individual basis can also be a highly valuable source of information
to investors. It is necessary to clarify that the obligation to publish those
managers' transactions also includes the pledging or lending of financial
instruments and also transactions by another person exercising discretion for
the manager. In order to ensure an appropriate balance between the level of
transparency and the number of reports notified to competent authorities and
the public, a uniform threshold should be introduced in this Regulation below
which transactions shall not be notified.

(29)
A set of effective tools and powers for the
competent authority of each Member State guarantees supervisory effectiveness.
Market undertakings and all economic actors should also contribute to market
integrity. In this sense, the designation of a single competent authority for
market abuse should not exclude collaboration links or delegation under the
responsibility of the competent authority, between that authority and market
undertakings with a view to guaranteeing efficient supervision of compliance
with the provisions in this Regulation.

(30)
For the purpose of detecting cases of insider
dealing and market manipulation, it is necessary for competent authorities to
have the possibility to have access to private premises and seize documents.
The access to private premises is necessary in particular where: the person to
whom a demand for information has already been made fails (wholly or in part)
to comply with it; or where there are reasonable grounds for believing that if
a demand were to be made, it would not be complied with, or that the documents
or information to which the information requirement relates, would be removed,
tampered with or destroyed.

(31)
Existing telephone and data traffic records from
investment firms executing transactions, and existing telephone and data traffic
records from telecom operators constitute crucial, and sometimes the only, evidence
to detect and prove the existence of insider dealing and market manipulation. Telephone
and data traffic records may establish the identity of a person responsible for
the dissemination of false or misleading information, that persons have been in
contact at a certain time, and that a relationship exists between two or more
people. In order to introduce a level playing field in
the Union in relation to the access by competent authorities to telephone and existing data traffic records held
by a telecommunication operator or by an investment
firm, competent authorities should be able to require existing telephone and
existing data traffic records held by a
telecommunication operator or by an investment firm,
where a reasonable suspicion exists that such records related to the
subject-matter of the inspection may be relevant to prove insider dealing or
market manipulation as defined in [new MAD] in violation of this Regulation or
Directive [new MAD]. Telephone and data traffic records do not encompass the
content of such records.

(32)
Since market abuse can take place across borders
and markets, competent authorities should be required to cooperate and exchange
information with other competent and regulatory authorities, and with ESMA, in
particular in relation to investigation activities. Where a competent authority
is convinced that market abuse is being, or has been, carried out in another
Member State or affecting financial instruments traded in another Member State,
it should notify that fact to the competent authority and ESMA. In cases of
market abuse with cross-border effects, ESMA should be required to coordinate
the investigation if requested to do so by one of the competent authorities
concerned.

(33)
In order to ensure exchanges of information and
cooperation with third country authorities in relation to the effective
enforcement of this Regulation, competent authorities should conclude
cooperation arrangements with their counterparts in third countries. Any
transfer of personal data carried out on the basis of those agreements shall
comply with Directive (EC) 95/46/EC of the European Parliament and of the
Council of 24 October 1995 on the protection of individuals with regard to the
processing of personal data and on the free movement of such data[28]
and with Regulation (EC) No 45/2001 of the European Parliament and of the
Council of 18 December 2000 on the protection of individuals with regard to the
processing of personal data by the Community institutions and bodies and on the
free movement of such data[29].

(34)
A sound prudential and conduct of business
framework for the financial sector should rest on strong supervisory and
sanctioning regimes. To this end, supervisory authorities should be equipped
with sufficient powers to act and should be able to rely on equal, strong and
deterrent sanctions regimes against all financial misconduct, sanctions which
should be enforced effectively. However, the High Level Group considered that
none of these elements is currently in place. A review of existing sanctioning
powers and their practical application aimed at promoting convergence of
sanctions across the range of supervisory activities has been carried out in
the Commission Communication of 8 December 2010 on reinforcing sanctioning
regimes in the financial sector[30].

(35)
Therefore, as well as providing regulators with
effective supervisory tools and powers, a set of administrative measures,
sanctions and fines should be laid down to ensure a common approach in Member
States and to enhance their deterrent effect. Administrative fines should take
into account factors such as the disgorgement of any identified financial
benefit, the gravity and duration of the breach, any aggravating or mitigating
factors, the need for fines to have a deterrent effect and, where appropriate,
include a discount for cooperation with the competent authority. The adoption
and publication of sanctions should respect fundamental rights as laid down in
the Charter of Fundamental Rights of the European Union, in particular the
right to respect for private and family life (Article 7), the right to the
protection of personal data (Article 8) and the right to an effective remedy
and to a fair trial (Article 47).

(36)
Whistleblowers bring new information to the
attention of competent authorities which assists them in detecting and
sanctioning cases of insider dealing and market manipulation. However,
whistleblowing may be deterred for fear of retaliation, or for lack of incentives.
This Regulation should therefore ensure that adequate arrangements are in place
to encourage whistleblowers to alert competent authorities to possible breaches
of this Regulation and to protect them from retaliation. However,
whistleblowers should only be eligible for those incentives where they bring to
light new information which they are not already legally obliged to notify and
where this information results in a sanction for a breach of this Regulation. Member
States should also ensure that whistleblowing schemes they implement include
mechanisms that provide appropriate protection of a reported person,
particularly with regard the right to the protection of his personal data and
procedures to ensure the right of the reported person of defence and to be
heard before the adoption of a decision concerning him as well as the right to
seek effective remedy before a court against a decision concerning him

(37)
Since Member States have adopted legislation
implementing Directive 2003/6/EC, and since delegated acts and implementing technical
standards are foreseen which should be adopted before the framework to be
introduced can be usefully applied, it is necessary to defer the application of
the substantive provisions of this Regulation for a sufficient period of time.

(38)
In order to facilitate a smooth transition to
the entry into application of this Regulation, market practices existing before
the entry into force of this Regulation and accepted by competent authorities
in accordance with Commission Regulation (EC) No 2273/2003 of 22 December 2003
implementing Directive 2003/6/EC of the European Parliament and of the Council
as regards exemptions for buy-back programmes and stabilisation of financial
instruments[31] for the purpose of
applying point 2(a) of Article 1 of Directive 2003/6/EC, may remain applicable
until one year after the date specified for effective application of this
Regulation provided that they are notified to ESMA.

(39)
This Regulation respects the fundamental rights
and observes the principles recognised in the Charter of Fundamental Rights of
the European Union as enshrined in the Treaty, notably the right to respect for
private and family life, the right to the protection of personal data, the
freedom of expression and information, the freedom to conduct a business, the
right to an effective remedy and to a fair trial, the presumption of innocence
and right of defence, the principles of legality and proportionality of
criminal offences and penalties, and the right not to be tried or punished
twice for the same offence. Limitations placed on these rights are in
accordance with article 52(1) of the Charter as they are necessary to ensure
the general interest objectives of the protection of investors and the
integrity of financial markets, and appropriate safeguards are provided to
ensure that rights are limited only to the extent necessary to meet these
objectives and by measures that are proportionate to the objective to be met.
In particular, reporting of suspicious transactions is necessary to ensure that
competent authorities may detect and sanction market abuse. Prohibiting
attempts to engage in market manipulation is necessary to enable competent
authorities to sanction such attempts where they have evidence of intent to
commit market manipulation, even in the absence of an identifiable effect on
market prices. Access to data and telephone records is necessary to provide
evidence and investigative leads on possible insider dealing or market
manipulation, and therefore for the detection and sanctioning of market abuse.
The conditions imposed by this Regulation ensure compliance with fundamental
rights. Measures on whistleblowing are necessary to facilitate the detection of
market abuse and to ensure the protection of the whistleblower and of the
reported person, including the protection of their private life, personal data,
and the right to be heard and to an effective remedy before a court.
Introducing common minimum rules for administrative measures, sanctions and
fines is necessary to ensure that comparable market abuse breaches are
sanctioned in a comparable way and to ensure that sanctions imposed are
proportionate to the breach. This Regulation does not in any way prevent Member
States from applying their constitutional rules relating to freedom of the
press and freedom of expression in the media.

(40)
Directive 95/46 of the European Parliament and
of the Council of 24 October 1995 on the protection of individuals with regard
to the processing of personal data and on the free movement of such data[32]
and Regulation (EU) No 45/2001 of the European Parliament and of the Council of
18 December 2000 on the protection of individuals with regard to the processing
of personal data by the EU institutions and bodies and on the free movement of
such data[33], govern the processing
of personal data carried out by ESMA within the framework of this Regulation
and under the supervision of the Member States competent authorities, in
particular the public independent authorities designated by the Member States.
Any exchange or transmission of information by competent authorities should
be in accordance with the rules on the transfer of personal data as laid down
in Directive 95/46/EC. And any exchange or transmission of information by ESMA
should be in accordance with the rules on the transfer of personal data as laid
down in Regulation (EC) No 45/2001.

(41)
This Regulation, as well as the delegated acts,
standards and guidelines adopted in accordance with it, are without prejudice
to the application of the Union rules on competition.

(42)
The Commission should be empowered to adopt
delegated acts in accordance with Article 290 of the Treaty. In particular,
delegated acts should be adopted in respect of the conditions for buy-back
programmes and stabilisation of financial instruments, the indicators for
manipulative behaviour listed in Annex 1, the threshold for determining the
application of the public disclosure obligation to emission allowance market
participants, the conditions for drawing up insider lists and the threshold and
conditions relating to managers' transactions. It is of particular importance
that the Commission carry out appropriate consultations during its preparatory
work, including at expert level. The Commission, when preparing and drawing-up
delegated acts, should ensure a simultaneous, timely and appropriate
transmission of relevant documents to the European Parliament and Council.

(43)
In order to ensure uniform conditions for the
implementation of this Regulation in respect of procedures for the
reporting of violations of this Regulation implementing powers should be
conferred on the Commission. Those powers should be exercised in accordance with
Regulation (EU) No 183/2011 of the European Parliament and of the Council of 16
February 2011 laying down the rules and general principles concerning
mechanisms for control by the Member States of the Commission's exercise of
implementing powers.

(44)
Technical standards in financial services should
ensure uniform conditions across the Union in matters covered by this
Regulation. As a body with highly specialised expertise, it would be efficient
and appropriate to entrust ESMA, with the elaboration of draft regulatory and
implementing technical standards which do not involve policy choices, for
submission to the Commission.

(45)
The Commission should adopt the draft regulatory
technical standards developed by ESMA in relation to procedures and
arrangements for trading venues aimed at preventing and detecting market abuse
and of systems and templates to be used by persons in order to detect and notify
suspicious orders and transactions and in respect of technical arrangements for
categories of persons for objective presentation of information recommending an
investment strategy and for disclosure of particular interests or indications
of conflicts of interest by means of delegated acts pursuant to Article 290
TFEU and in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010. It
is of particular importance that the Commission carry out appropriate
consultations during its preparatory work, including at expert level.

(46)
The Commission should also be empowered to adopt
implementing technical standards by means of implementing acts pursuant to
Article 291 TFEU and in accordance with Article 15 of Regulation (EU) No 1093/2010.
ESMA should be entrusted with drafting implementing technical standards for
submission to the Commission with regard to public disclosure of inside
information, formats of insider lists and formats and procedures for the
cooperation and exchange of information of competent authorities among
themselves and with ESMA.

(47)
Since the objective of the proposed action,
namely to prevent market abuse in the form of insider dealing and market
manipulation, cannot be sufficiently achieved by the Member States and can
therefore, by reason of the scale and effects of the measures, be better
achieved at Union level, the Union may adopt measures, in accordance with the
principle of subsidiarity as set out in Article 5 of the Treaty on European
Union. In accordance with the principle of proportionality, as set out in that
Article, this Regulation does not go beyond what is necessary in order to
achieve that objective.

(48)
The provisions of Directive 2003/6/EC being no
longer relevant and sufficient, that Directive should be repealed from [24 months after entry into force of this Regulation].The requirements and prohibitions of this
Regulation are strictly related to those in the MiFD, therefore they should
enter in to application on the date of entry into application of the MiFID
review.

HAVE ADOPTED THIS REGULATION:

CHAPTER I
GENERAL PROVISIONS

Section 1

Subject Matter and Scope

Article 1
Subject matter

This Regulation establishes a common
regulatory framework on market abuse to ensure the integrity of financial
markets in the Union and to enhance investor protection and confidence in those
markets.

Article 2
Scope

1.
This Regulation applies to the following:

(a)
financial instruments admitted to trading on a
regulated market or for which a request for admission to trading on a regulated
market has been made;

(b)
financial instruments traded on a MTF or on an
OTF in at least one Member State;

(c)
behaviour or transactions relating to a financial
instrument referred to in points (a) or (b) irrespective of whether or not the
behaviour or transaction actually takes place on a regulated market, MTF or OTF;

(d)
behaviour or transactions, including bids,
relating to the auctioning of emission allowances or other auctioned products
based thereon pursuant to Commission Regulation No 1031/2010.[34]
Without prejudice to any specific provisions referring to bids submitted in the
context of an auction, any requirements and prohibitions in this Regulation
referring to orders to trade shall apply to such bids.

2.
Articles 7 and 9 also apply to the acquisition
or disposal of financial instruments not referred to in points (a) and (b) of paragraph
1 but whose value relates to a financial instrument referred to in that
paragraph. This notably includes derivative instruments for the transfer of
credit risk that relate to a financial instrument referred to paragraph 1 and
financial contracts for differences that relate to such a financial instrument.

3.
Articles 8 and 10 also apply to transactions,
orders to trade or other behaviour relating to:

(a)
types of financial instruments, including derivative
contracts or derivative instruments for the transfer of credit risk where the
transaction, order or behaviour has or is likely or intended to have an effect
on a financial instrument referred to in points (a) and (b) of paragraph 1;

(b)
spot commodity contracts, which are not wholesale
energy products, where the transaction, order or behaviour has or is likely or
intended to have an effect on a financial instrument referred to in points (a)
and (b) of paragraph 1; or

(c)
types of financial instruments, including
derivative contracts or derivative instruments for the transfer of credit risk
where the transaction, order or behaviour has or is likely or intended to have
an effect on spot commodity contracts.

4.
The prohibitions and requirements in this
Regulation shall apply to actions carried out in the Union or outside the Union
concerning instruments referred to in paragraphs 1 to 3.

Section 2

Exclusion from the Scope

Article 3
Exemption for buy-back programmes and stabilisation

1.
The prohibitions in Articles 9 and 10 of this
Regulation do not apply to trading in own shares in buy-back programmes when
the full details of the programme are disclosed prior to the start of trading,
trades are reported as being part of the buy-back programme to the competent
authority and subsequently disclosed to the public, and adequate limits with
regards to price and volume are respected.

2.
The prohibitions in Articles 9 and 10 of this
Regulation do not apply to trading in own shares for the stabilisation of a
financial instrument when stabilisation is carried out for a limited time
period, when relevant information about the stabilisation is disclosed, and
adequate limits with regards to price are respected.

3.
The Commission shall adopt, by means of
delegated acts in accordance with Article 31, measures specifying the conditions
such buy-back programmes and stabilisation measures referred to in paragraphs 1
and 2 need to adhere to, including conditions for trading, restrictions
regarding time and volume, disclosure and reporting obligations, and price
conditions.

Article 4
Exclusion for monetary and public debt management activities and climate policy
activities

1.
This Regulation does not apply to transactions,
orders or behaviours carried out in pursuit of monetary, exchange rate or public
debt management policy by a Member State, by the European System of Central
Banks, by a national central bank of a Member State, by any other ministry,
agency or special purpose vehicle of a Member State, or by any person acting on
their behalf and, in the case of a Member State that is a federal state, to
such transactions, orders or behaviours carried out by a member making up the
federation. It shall also not apply to such transactions, orders or behaviours
carried out by the Union, a special purpose vehicle for several Member States,
the European Investment Bank, an international financial institution
established by two or more Member States, which has the purpose to mobilise
funding and provide financial assistance to the benefit of its members that are
experiencing or threatened by severe financing problems or the European
Financial Stability Facility.

2.
This Regulation does not apply to the activity
of a Member State, the European Commission or any other officially designated
body, or of any person acting on their behalf, which concerns emission
allowances and which is undertaken in the pursuit of the Union's climate
policy.

Section 3

Definitions

Article 5
Definitions

For the purposes of this Regulation, the
following definitions apply:

1.
"financial instrument" means any
instrument within the meaning of Article 2(1)(8) of Regulation [MiFIR].

2.
"regulated market" means a
multilateral system in the Union within the meaning of Article 2(1)(5) of Regulation[MiFIR].

3.
"multilateral Trading Facility (MTF)"
means a multilateral system in the Union within the meaning of Article 2(1)(6)
of Regulation[MiFIR].

4.
"organised Trading Facility (OTF)"
means a system or facility in the Union referred to in Article 2(1)(7) of Regulation[MiFIR].

5.
"trading venue" means a system or facility
in the Union referred to in Article 2(1)(26) of Regulation[MiFIR].

6.
"SME growth market" means a MTF in the
Union within the meaning of Article 4(1)(17) of Directive [new MiFID].

7.
"competent authority" means the
competent authority designated in accordance with Article 16.

8.
"person" means any natural or legal
person.

9.
"commodity" means a commodity within
the meaning of Article 2(1) of Commission Regulation (EC) No 1287/2006[35].

10.
"spot commodity contract" means any
contract for the supply of a commodity traded on a spot market which is
promptly delivered when the transaction is settled including any derivative
contract that must be settled physically.

11.
"spot market" means any commodity
market in which commodities are sold for cash and promptly delivered when the
transaction is settled.

12.
"buy-back programme" means trading in
own shares in accordance with Articles 19 to 24 of Council Directive 77/91/EEC[36].

13.
"algorithmic trading" means trading of
financial instruments using computer algorithms within the meaning of Article
4(1)(37) of Directive [new MiFID].

14.
"emission allowance" means a financial
instrument as defined in point (11) of Section C of Annex I of Directive [new
MiFID].

15.
"emission allowance market
participant" means any person who enters into transactions, including the
placing of orders to trade, in emission allowances.

16.
"issuer of a financial instrument"
means an issuer as defined in Article 2(1)(h) of Directive 2003/71/EC[37].

17.
"ACER" means the Agency for the
Cooperation of Energy Regulators established under Regulation (EC) No. 713/2009[38].

18.
"wholesale energy product" has the
same meaning as in Article 2(4) of [Regulation (EU) No...of the European
Parliament and the Council on Wholesale Energy Market Integrity and
Transparency][39].

19.
"national regulatory authority" has the
same meaning as in Article 2(7) of [Regulation (EU) No...of the European
Parliament and the Council on Wholesale Energy Market Integrity and
Transparency][40].

Section 4

Inside information, insider dealing and market
manipulation

Article 6
Inside information

1.
For the purposes of this Regulation, inside
information shall comprise the following types of information:

(a)
information of a precise nature, which has not
been made public, relating, directly or indirectly, to one or more issuers of
financial instruments 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.

(b)
in relation to derivatives on commodities,
information of a precise nature, which has not been made public, relating,
directly or indirectly, to one or more such derivatives or to the related spot
commodity contract, and which, if it were made public, would be likely to have
a significant effect on the prices of such derivatives or related spot
commodity contracts; notably information which is required to be disclosed in
accordance with legal or regulatory provisions at the Union or national level,
market rules, contracts or customs, on the relevant commodity derivatives or
spot markets.

(c)
in relation to emission allowances or auctioned
products based thereon, information of a precise nature, which has not been
made public, relating, directly or indirectly, to one or more such instruments,
and which, if it were made public, would be likely to have a significant effect
on the prices of such instruments or on the prices of related derivative
financial instruments.

(d)
for persons charged with the execution of orders
concerning financial instruments, it also means information conveyed by a
client and related to the client's pending orders in financial instruments,
which is of a precise nature, which relates, directly or indirectly, to one or
more issuers of financial instruments 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, the price of related spot
commodity contracts, or on the price of related derivative financial instruments.

(e)
information not falling within paragraphs (a),
(b), (c) or (d) relating to one or more issuers of financial instruments or to
one or more financial instruments, which is not generally available to the
public, but which, if it were available to a reasonable investor, who regularly
deals on the market and in the financial instrument or a related spot commodity
contract concerned, would be regarded by that person as relevant when deciding
the terms on which transactions in the financial instrument or a related spot
commodity contract should be effected.

2.
For the purposes of applying paragraph 1,
information shall be deemed to be of a precise nature if it indicates a set of
circumstances which exists or may reasonably be expected to come into existence
or an event which has occurred or may reasonably be expected to do so and if it
is specific enough to enable a conclusion to be drawn as to the possible effect
of that set of circumstances or event on the prices of the financial instruments, the related spot commodity contracts, or the
auctioned products based on the emission allowances.

3.
For the purposes of applying paragraph 1,
information which, if it were made public, would be likely to have a
significant effect on the prices of the financial instruments, the related spot
commodity contracts, or the auctioned products based on the emission allowances
shall mean information a reasonable investor would be likely to use as part of
the basis of his investment decisions.

Article 7
Insider dealing and improper disclosure of inside information

1.
For the purposes of this Regulation, insider
dealings arises where a person possesses inside information and uses that
information by acquiring or disposing of, for his own account or for the
account of a third party, either directly or indirectly, financial instruments
to which that information relates. The use of inside information to cancel or
amend an order concerning a financial instrument to which the information
relates where the order was placed before the person concerned possessed the
inside information, shall also be considered as insider dealing.

2.
For the purposes of this Regulation, attempting
to engage in insider dealing arises where a person possesses inside information
and attempts to acquire or dispose of, for his own account or for the account
of a third party, either directly or indirectly, financial instruments to which
that information relates. The attempt to cancel or amend an order concerning a
financial instrument to which the information relates on the basis of inside
information where the order was placed before the person concerned possessed
the inside information, shall also be considered an attempt to engage in
insider dealing.

3.
For the purposes of this Regulation, a person
recommends or induces another person to engage in insider dealing if the person
possesses inside information and recommends or induces another person, on the
basis of inside information, to acquire or dispose of financial instruments to
which that information relates.

4.
For the purposes of the Regulation, improper
disclosure of inside information arises where a person possesses inside
information and discloses the inside information to any other person, except
where the disclosure is made in the normal course of the exercise of duties resulting
from an employment or profession.

5.
Paragraphs 1, 2, 3 and 4 apply to any person who
possesses inside information as a result of any of the following situations:

(a)
being a member of the administrative, management
or supervisory bodies of the issuer;

(b)
having a holding in the capital of the issuer;

(c)
his having access to the information through the
exercise of duties resulting from an employment or profession;

(d)
being involved in criminal activities.

Paragraphs 1, 2, 3 and 4 also apply to any inside
information obtained by a person under circumstances other than those referred
to in points (a) to (d) and which the person knows or ought to know, is inside
information.

6.
Where the person referred to in paragraph 1 and
2 is a legal person, the provisions of those paragraphs shall also apply to the
natural persons who take part in or influence the decision to carry out, or attempt
to carry out, the acquisition or disposal for the account of the legal person
concerned.

7.
Where the person referred to in paragraph 1 is a
legal person, the provisions of that paragraph shall not apply to a transaction
by the legal person if the legal person had in place effective arrangements
which ensure that no person in possession of inside information relevant to the
transaction had any involvement in the decision or behaved in such a way as to
influence the decision or had any contact with those involved in the decision
whereby the information could have been transmitted or its existence could have
been indicated.

8.
Paragraph 1 shall not apply to transactions
conducted in the discharge of an obligation that has become due to acquire or
dispose of financial instruments where that obligation results from an
agreement concluded, or is to satisfy a legal or regulatory obligation that
arose, before the person concerned possessed inside information.

9.
In relation to auctions of emission allowances
or other auctioned products based thereon that are held pursuant to Regulation
(No) 1031/2010, the prohibition under paragraph 1 shall also apply to the use
of inside information by submitting, modifying or withdrawing a bid for own
account of the person that possesses inside information or for the account of a
third party.

Article 8
Market manipulation

1.
For the purposes of this Regulation, market
manipulation shall comprise the following activities:

(a)
entering into a transaction, placing an order to
trade or any other behaviour which has the following consequences:

–
it gives, or is likely to give, false or
misleading signals as to the supply of, demand for, or price of, a financial
instrument or a related spot commodity contract; or

–
it secures, or is likely to secure, the price of
one or several financial instruments or a related spot commodity contracts at an
abnormal or artificial level;

(b)
entering into a transaction, placing an order to
trade or any other behaviour affecting the price of one
or several financial instruments or a related spot commodity contract, which employs a fictitious device or any other form of deception or
contrivance; or

(c)
disseminating information through the media,
including the Internet, or by any other means, which has the consequences
referred to in subparagraph (a), where the person who made the dissemination
knew, or ought to have known, that the information was false or misleading. When
information is disseminated for the purposes of journalism, such dissemination
of information shall be assessed taking into account the rules governing the
freedom of the press and freedom of expression in other media, unless:

–
those persons derive, directly or indirectly, an
advantage or profits from the dissemination of the information in question; or

–
the disclosure or dissemination is made with the
intention of misleading the market as to the supply of, demand for, or price of
financial instruments.

2.
For the purposes of this Regulation, an attempt
to engage in market manipulation shall comprise the following:

(a)
attempting to enter into a transaction, trying
to place an order to trade or trying to engage in any other behaviour as
defined in paragraph 1(a) or (b); or

(b)
attempting to disseminate information as defined
in paragraph 1(c).

3.
The following behaviour shall be considered as
market manipulation or attempts to engage in market manipulation:

(a)
conduct by a person, or persons acting in
collaboration, to secure a dominant position over the supply of or demand for a
financial instrument or related spot commodity contracts which has the effect
of fixing, directly or indirectly, purchase or sale prices or creating other
unfair trading conditions,

(b)
the buying or selling of financial instruments
at the close of the market with the effect or intention of misleading investors
acting on the basis of closing prices,

(c)
the sending of orders to a trading venue by
means of algorithmic trading, including high frequency trading, without an
intention to trade but for the purpose of:

–
disrupting or delaying the functioning of the
trading system of the trading venue;

–
making it more difficult for other persons to
identify genuine orders on the trading system of the trading venue; or

–
creating a false or misleading impression about
the supply of or demand for a financial instrument.

(d)
taking advantage of occasional or regular access
to the traditional or electronic media by voicing an opinion about a financial
instrument or related spot commodity contract (or indirectly about its issuer)
while having previously taken positions on that financial instrument or related
spot commodity contract and profiting subsequently from the impact of the
opinions voiced on the price of that instrument or related spot commodity
contract, without having simultaneously disclosed that conflict of interest to
the public in a proper and effective way.

(e)
the buying or selling on the secondary market of
emission allowances or related derivatives prior to the auction held pursuant
to Regulation No 1031/2010 with the effect of fixing the auction clearing price
for the auctioned products at an abnormal or artificial level or misleading
bidders bidding in the auctions.

4.
For the purposes of applying points (a) and (b) of
paragraph 1 of Article 8, and without prejudice to the forms of behaviour set
out in paragraph 3, Annex I defines non-exhaustive indicators related to the
employment of fictitious devices or any other form of deception or contrivance,
and non-exhaustive indicators related to false or misleading signals and to
price securing.

5.
The Commission may adopt, by means of delegated
acts in accordance with Article 31, measures specifying the indicators laid
down in Annex I, in order to clarify their elements and to take into account
technical developments on financial markets.

CHAPTER 2
INSIDER DEALING AND MARKET MANIPULATION

Article 9
Prohibition of insider dealing and of improperly disclosing inside information

A person shall not:

(a)
engage or attempt to engage in insider dealing;

(b)
recommend or induce another person to engage in
insider dealing; or

(c)
improperly disclose inside information.

Article 10
Prohibition of market manipulation

A person shall not engage in market
manipulation or attempt to engage in market manipulation.

Article 11
Prevention and detection of market abuse

1.
Any person who operates the business of a trading
venue shall adopt and maintain effective arrangements and procedures in
accordance with [Articles 31 and 56] of Directive [new MiFID] aimed at preventing
and detecting market abuse.

2.
Any person professionally arranging or executing
transactions in financial instruments shall have systems in place to detect and
report orders and transactions that might constitute insider dealing, market
manipulation or an attempt to engage in market manipulation or insider dealing.
If that person reasonably suspects that an order or transaction in any
financial instrument, whether placed or executed on or outside a trading venue,
might constitute insider dealing, market manipulation or an attempt to engage
in market manipulation or insider dealing, the person shall notify the competent
authority without delay.

3.
ESMA shall develop draft regulatory technical standards
to determine appropriate arrangements and procedures for persons to comply with
the requirements established in paragraph 1 and to determine the systems and
notification templates to be used by persons to comply with the requirements
established in paragraph 2.

ESMA shall submit the draft regulatory technical
standards referred to in the first subparagraph to the Commission by [...].

Power is conferred to the Commission to adopt the regulatory
technical standards referred to in the first subparagraph in accordance with
Articles 10 to 14 of Regulation 1095/2010.

CHAPTER 3
DISCLOSURE REQUIREMENTS

Article 12
Public disclosure of inside information

1.
An issuer of a financial instrument shall inform
the public as soon as possible of inside information, which directly concerns
the issuer, and shall, for an appropriate period, post on its Internet site all
inside information it is required to disclose publicly.

2.
An emission allowance market participant shall
publicly, effectively and in a timely manner disclose inside information
concerning emission allowances which it holds in respect of its business,
including aviation activities as specified in Annex I of Directive 2003/87/EC
or installations within the meaning of Article 3(e) of the same Directive which
the participant concerned, or parent undertaking or related undertaking, owns
or controls or for which the participant, or its parent undertaking or related
undertaking, is responsible for operational matters, either in whole or in
part. With regard to installations, such disclosure shall include relevant
information to the capacity and utilisation of installations, including planned
or unplanned unavailability of such installations.

The first subparagraph shall not apply to an
emission allowance market participant where the installations or aviation
activities that it owns, controls or is responsible for, in the preceding year
have had emissions not exceeding a minimum threshold of carbon dioxide
equivalent and, where they carry out combustion activities, have had a rated
thermal input not exceeding a minimum threshold.

The Commission shall adopt, by means of a
delegated act in accordance with Article 31, measures establishing a minimum threshold of carbon dioxide equivalent and a minimum
threshold of rated thermal input for the purposes of application of the
exemption provided for in the second subparagraph.

3.
Paragraphs 1 and 2 shall not apply to
information which is only inside information within the meaning of point (e) of
paragraph 1 of Article 6.

4.
Without prejudice to paragraph 5, an issuer of a
financial instrument or an emission allowance market participant, not exempted
pursuant to the second subparagraph of paragraph 2 of Article 12, may under his
own responsibility delay the public disclosure of inside information, as
referred to in paragraph 1, such as not to prejudice his legitimate interests
provided that both of the following conditions are met:

–
 the omission would not be likely to mislead the
public;

–
 the issuer of a financial instrument or
emission allowance market participant is able to ensure the confidentiality of
that information.

Where an issuer of a financial instrument or
emission allowance market participant has delayed the disclosure of inside
information under this paragraph it shall inform the competent authority that
disclosure of the information was delayed immediately after the information is
disclosed to the public.

5.
A competent authority may permit the delay by an
issuer of a financial instrument of the public disclosure of inside information
provided that the following conditions are satisfied:

–
 the information is of systemic importance;

–
 it is in the public interest to delay its
publication;

–
 the confidentiality of that information can be
ensured.

That permission shall be in writing. The
competent authority shall ensure that the delay is only for such period as is
necessary in the public interest.

The competent authority shall at least once every
week review whether the delay continues to be appropriate and shall revoke the
authorisation immediately if any of the conditions in points (a), (b) or (c)
are no longer satisfied.

6.
Where an issuer of a financial instrument or an
emission allowance market participant, not exempted pursuant to the second
subparagraph of paragraph 2 of Article 12, or a person acting on his behalf or
for his account, discloses any inside information to any third party in the
normal exercise of his duties resulting from employment or profession, as
referred to in Article 7(4), he must make complete and effective public
disclosure of that information, simultaneously in the case of an intentional
disclosure, and promptly in the case of a non-intentional disclosure. This
paragraph shall not apply if the person receiving the information owes a duty
of confidentiality, regardless of whether such duty is based on a law, on
regulations, on articles of association, or on a contract.

7.
Inside information relating to issuers of a
financial instrument, whose financial instruments are admitted to trading on an
SME growth market, may be posted by the trading venue on its website instead of
on the website of the issuer where the trading venue chooses to provide this
facility for issuers on that market. In that event such issuer is deemed to
have fulfilled the obligation in paragraph 1.

8.
This Article shall not apply to issuers who have
not requested or approved admission of their financial instruments to trading
on a regulated market in a Member State or, in the case of an instrument only
traded on a MTF or an OTF, have not requested or approved trading of their
financial instruments on a MTF or an OTF in a Member State.

9.
ESMA shall develop draft implementing technical standards
to determine:

–
the technical means for appropriate public
disclosure of inside information as referred to in paragraphs 1, 6 and 7;

–
the technical means for delaying the public disclosure
of inside information as referred to in paragraphs 4 and 5.

ESMA shall submit the draft implementing technical
standards referred to in the first subparagraph to the Commission by [...].

Power is conferred to the Commission to adopt the
implementing technical standards referred to in the first subparagraph in
accordance with Article 15 of Regulation 1095/2010.

Article 13
Insider lists

1.
Issuers of a financial instrument or emission
allowance market participants, not exempted pursuant to the second subparagraph
of paragraph 2 of Article 12, and any person acting on their behalf or on their
account, shall:

–
draw up a list of all persons working for them,
under a contract of employment or otherwise, who have access to inside information;

–
regularly update the list; and

–
provide the list to the competent authority as
soon as possible upon its request.

2.
Issuers of a financial instrument whose
financial instruments are admitted to trading on an SME growth market shall be
exempt from drawing up such a list. However, if requested to do so by the
competent authority as part of the exercise of its supervisory or investigatory
functions, that issuer shall provide the competent authority with a list
identifying those persons working for them with access to inside information.

3.
This Article shall not apply to issuers who have
not requested or approved admission of their financial instruments to trading
on a regulated market in a Member State or, in the case of an instrument only
traded on a MTF or an OTF, have not requested or approved trading of their
financial instruments on a MTF or an OTF in a Member State.

4.
The Commission shall adopt, by means of
delegated acts in accordance with Article 31, measures determining
the content of a list as referred to in paragraph 1, including information as
to the identities and the reasons for persons to be included on an insider list,
and the conditions under which issuers of a financial instrument or emission
allowance market participants, or entities acting on their behalf, are to draw
up such a list, including the conditions under which such lists are to be
updated, the time for which they are kept, and the responsibilities of the
persons thereon.

5.
This Article shall also
apply to any auction platform, auctioneer and auction
monitor in relation to auctions of emission allowances or other auctioned
products based thereon that are
held pursuant to Regulation (No) 1031/2010.

6.
ESMA shall develop draft implementing technical standards
to determine the precise format of insider lists
and the format for updating insider lists referred to in this Article.

ESMA shall submit the draft implementing technical
standards referred to in the first subparagraph to the Commission by [...].

Power is conferred to the Commission to adopt the
implementing technical standards referred to in the first subparagraph in
accordance with Article 15 of Regulation 1095/2010.

Article 14
Manager's transactions

1.
Persons discharging managerial responsibilities
within an issuer of a financial instrument or an emission allowance market
participant, not exempted pursuant to the second subparagraph of paragraph 2 of
Article 12, as well as persons closely associated with them, shall ensure that
information is made public about the existence of transactions conducted on
their own account relating to the shares of that issuer, or to derivatives or
other financial instruments linked to them, or in emission allowances. Such
persons shall ensure that the information is made public within two business
days after the day on which the transaction occurred.

2.
For the purposes of paragraph 1 transactions
that must be notified shall include:

–
the pledging or lending of financial instruments
by or on behalf of a person referred to in paragraph 1;

–
transactions undertaken by a portfolio manager
or other person on behalf of a person referred to in paragraph 1 including
where discretion is exercised by that manager or other person.

3.
Paragraph 1 shall not apply to transactions
totalling under EUR 20,000 over the period of a calendar year.

4.
This Article shall also
apply to any auction platform, auctioneer and auction
monitor in relation to auctions of emission allowances or other auctioned
products based thereon that are held pursuant to Regulation (No) 1031/2010.

5.
The Commission may adopt, by means of delegated
acts in accordance with Article 31, measures modifying the threshold in
paragraph 3 taking into account the developments in financial markets.

6.
The Commission shall adopt, by means of
delegated acts in accordance with Article 31, measures specifying
the professional functions of persons who are considered to discharge
managerial responsibility as referred to in paragraph 1, the types of
association, including by birth as well as under civil and contractual law,
considered to create a close personal association, the characteristics of a
transaction referred to in paragraph 2 which trigger that duty, and the
information that must be made public and the means of informing the public.

Article 15
Investment recommendations and statistics

1.
Persons who produce or disseminate information
recommending or suggesting an investment strategy, intended for distribution
channels or for the public, shall take reasonable care to ensure that such
information is objectively presented, and to disclose their interests or indicate
conflicts of interest concerning the financial instruments to which that
information relates.

2.
Public institutions disseminating statistics
liable to have a significant effect on financial markets shall disseminate them
in an objective and transparent way.

3.
ESMA shall develop draft regulatory technical standards
to determine the technical arrangements, for the
various categories of person referred to in paragraph 1, for objective
presentation of information recommending an investment strategy and for disclosure
of particular interests or indications of conflicts of interest.

ESMA shall submit the draft regulatory technical
standards referred to in the first subparagraph to the Commission by [...].

Power is conferred to the Commission to adopt the regulatory
technical standards referred to in the first subparagraph in accordance with
Articles 10 to 14 of Regulation 1095/2010.

CHAPTER 4
ESMA AND COMPETENT AUTHORITIES

Article 16
Competent authorities

Without prejudice to the competences of the
judicial authorities, each Member State shall designate a single administrative
competent authority for the purpose of this Regulation. The competent authority shall ensure that the provisions of this
regulation are applied on its territory, regarding all actions carried out on
its territory, and those actions carried out abroad relating to instruments
admitted to trading on a regulated market, for which a request for admission to
trading on such market has been made, or which are traded on an MTF or OTF
operating, within its territory. Member States shall
inform the Commission, ESMA and the competent authorities of other Member
States thereof.

Article 17
Powers of competent authorities

1.
Competent authorities shall exercise their
functions in any of the following ways:

(a)
directly;

(b)
in collaboration with other authorities or with
the market undertakings;

(c)
under their responsibility by delegation to such
authorities or to market undertakings;

(d)
by application to the competent judicial
authorities.

2.
In order to fulfil their duties under this
Regulation, competent authorities shall have, in conformity with national law,
at least the following supervisory and investigatory powers:

(a)
request access to any document in any form, and
to receive or take a copy thereof;

(b)
request information from any person, including
those who are successively involved in the transmission of orders or conduct of
the operations concerned, as well as their principals, and if necessary, to
summon and question any such person with a view to obtain information;

(c)
in relation to derivatives on commodities,
request information from market participants on related spot markets according
to standardized formats, obtain reports on transactions, and have direct access
to traders' systems;

(d)
carry out on-site inspections at sites other
than private premises with or without announcement;

(e)
after having obtained prior authorisation from
the judicial authority of the Member State concerned in accordance with
national law, and where a reasonable suspicion exists that documents related to
the subject-matter of the inspection may be relevant to prove a case of insider
dealing or market manipulation in violation of this Regulation or Directive
[new MAD], enter private premises in order to seize documents in any form ;

(f)
require existing telephone and existing data
traffic records held by a telecommunication operator or by an investment firm, where a reasonable suspicion exists that such
records related to the subject-matter of the inspection may be relevant to
prove insider dealing or market manipulation as defined in[new MAD] in violation of this Regulation or
Directive [new MAD]; these records shall however not concern the content of the
communication to which they relate.]

3.
The competent authorities shall exercise the supervisory
and investigatory powers, referred to in paragraph 2, in accordance with
national law.

4.
The processing of personal data collected in the
exercise of the supervisory and investigatory powers pursuant to this Article
shall be carried out in accordance with Directive 95/46/EC.

5.
Member States shall ensure that appropriate
measures are in place so that competent authorities have all the supervisory
and investigatory powers that are necessary to fulfil their duties.

Article 18
Cooperation with ESMA

1.
The competent authorities shall cooperate with
ESMA for the purposes of this Regulation, in accordance with Regulation (EU) No
1095/2010.

2.
The competent authorities shall, without delay,
provide ESMA with all information necessary to carry out its duties, in
accordance with Article 35 of Regulation (EU) No 1095/2010.

3.
ESMA shall develop draft implementing technical standards
to determine the procedures and forms for
exchange of information as referred to in paragraph 2.

ESMA shall submit the draft implementing technical
standards referred to in the first subparagraph to the Commission by [...].

Power is conferred to the Commission to adopt the
implementing technical standards referred to in the first subparagraph in
accordance with Article 15 of Regulation 1095/2010.

Article 19
Obligation to co-operate

1.
Competent authorities shall cooperate with each
other and ESMA where it is necessary for the purposes of this Regulation. In
particular, competent authorities shall render assistance to competent
authorities of other Member States and ESMA, and, without undue delay, exchange
information and cooperate in investigation and enforcement activities. This
cooperation and assistance shall also apply as regards the Commission in
relation to the exchange of information relating to commodities which are
agricultural products listed in Annex I to the Treaty.

2.
Competent authorities and ESMA shall cooperate
with ACER and the national regulatory authorities of the Member States to
ensure that a coordinated approach is taken to the enforcement of the relevant
rules where transactions, orders to trade or other actions or behaviours relate
to one or more financial instruments to which this Regulation applies and also
to one or more wholesale energy products to which Article 3, 4 and 5 of [Regulation
(EU) No...of the European Parliament and the Council on Wholesale Energy Market
Integrity and Transparency] apply. Competent authorities shall consider the
specific characteristics of the definitions of Article 2 of [Regulation (EU)
No...of the European Parliament and the Council on Wholesale Energy Market
Integrity and Transparency] and the provisions of
Article 3, 4 and 5 of [Regulation (EU) No...of the
European Parliament and the Council on Wholesale Energy Market Integrity and
Transparency] when they apply
Articles 6, 7 and 8 of this Regulation to financial instruments related to wholesale
energy products.

3.
Competent authorities shall, on request,
immediately supply any information required for the purpose referred to in
paragraph 1.

4.
Where a competent authority is convinced that
acts contrary to the provisions of this Regulation are being, or have been,
carried out on the territory of another Member State or that acts are affecting
financial instruments traded on a trading venue situated in another Member
State, it shall give notice of that fact in as specific a manner as possible to
the competent authority of the other Member State and to ESMA and, in relation
to wholesale energy products, to ACER. The competent authorities of the various
Member States involved shall consult each other and ESMA and, in relation to
wholesale energy products, ACER, on the appropriate action to take and inform
each other of significant interim developments. They shall coordinate their
action, in order to avoid possible duplication and overlap when applying
administrative measures, sanctions and fines to those cross border cases in
accordance with Articles 24, 25, 26, 27 and 28, and assist each other in the
enforcement of their decisions.

5.
The competent authority of one Member State may
request assistance of the competent authority of another Member State with
regard to on-site inspections or investigations.

The competent authority shall inform ESMA of
any request referred to in the first subparagraph. In case of an investigation
or an inspection with cross-border effect, ESMA shall if requested to do so by
one of the competent authorities coordinate the investigation or inspection.

Where a competent authority receives a request
from a competent authority of another Member State to carry out an on-site
inspection or an investigation, it may do any of the following:

(a)
carry out the on-site inspection or
investigation itself;

(b)
allow the competent authority which submitted
the request to participate in an on-site inspection or investigation;

(c)
allow the competent authority which submitted
the request to carry out the on-site inspection or investigation itself;

(d)
appoint auditors or experts to carry out the
on-site inspection or investigation;

(e)
share specific tasks related to supervisory
activities with the other competent authorities.

6.
Without prejudice to Article 258 TFEU, a
competent authority whose request for information or assistance in accordance
with paragraphs 1, 2, 3 and 4 is not acted upon within a reasonable time or
whose request for information or assistance is rejected may refer that
rejection or absence of action within a reasonable timeframe to ESMA.

In those situations, ESMA may act in accordance
with Article 19 of Regulation (EU) No 1095/2010, without prejudice to the
possibility of ESMA acting in accordance with Article 17 of Regulation (EU) No
1095/2010.

7.
Competent authorities shall cooperate and
exchange information with relevant national and third country regulatory
authorities responsible for the related spot markets where they have reasonable
grounds to suspect that acts, which constitute market abuse in accordance with
Article 2, are being, or have been, carried out. This cooperation shall ensure
a consolidated overview of the financial and spot markets, and detect and
sanction cross-market and cross-border market abuses.

In relation to emission allowances, the
co-operation and exchange of information provided for under the preceding
subparagraph shall also be ensured with:

(a)
the auction monitor, with regard to auctions of
emission allowances or other auctioned products based thereon that are held
pursuant to Regulation (No) 1031/2010;

(b)
competent authorities, registry administrators,
including the Central Administrator, and other public bodies charged with the
supervision of compliance under Directive 2003/87/EC.

ESMA shall perform a facilitation and
coordination role in relation to the cooperation and exchange of information
between competent authorities and regulatory authorities in other Member states
and third countries. Competent authorities shall wherever possible conclude
cooperation arrangements with third country regulatory authorities responsible
for the related spot markets in accordance with Article 20.

8.
The disclosure of personal data to a third
country shall be governed by Articles 22 and 23.

9.
ESMA shall develop draft implementing technical standards
to determine the procedures and forms for
exchange of information and assistance as referred to in this Article.

ESMA shall submit the draft implementing technical
standards referred to in the first subparagraph to the Commission by [...].

Power is conferred to the Commission to adopt the
implementing technical standards referred to in the first subparagraph in
accordance with Article 15 of Regulation 1095/2010.

Article 20
Cooperation with third countries

1.
The competent authorities of Member States shall
where necessary conclude cooperation arrangements with competent authorities of
third countries concerning the exchange of information with competent
authorities in third countries and the enforcement of obligations arising under
this Regulation in third countries. These cooperation arrangements shall ensure
at least an efficient exchange of information that allows the competent
authorities to carry out their duties under this Regulation.

A competent authority shall inform ESMA and
other competent authorities of Member States where it proposes to enter into
such an arrangement.

2.
ESMA shall coordinate the development of
cooperation arrangements between the competent authorities of Member States and
the relevant competent authorities of third countries. For that purpose, ESMA
shall prepare a template document for cooperation arrangements that may be used
by competent authorities of Member States.

ESMA shall also coordinate the exchange between
competent authorities of Member States of information obtained from competent
authorities of third countries that may be relevant to the taking of measures
under Articles 24, 25, 26, 27 and 28.

3.
The competent authorities shall conclude
cooperation arrangements on exchange of information with the competent
authorities of third countries only where the information disclosed is subject
to guarantees of professional secrecy which are at least equivalent to those
set out in Article 21. Such exchange of information must be intended for the
performance of the tasks of those competent authorities.

4.
The disclosure of personal data to a third
country shall be governed by Articles 22 and 23.

Article 21
Professional secrecy

5.
Any confidential information received, exchanged
or transmitted pursuant to this Regulation shall be subject to the conditions
of professional secrecy laid down in paragraph 2 and 3.

6.
The obligation of professional secrecy applies
to all persons who work or who have worked for the competent authority or for
any authority or market undertaking to whom the competent authority has
delegated its powers, including auditors and experts contracted by the
competent authority. Information covered by professional secrecy may not be
disclosed to any other person or authority except by virtue of provisions laid
down by law.

7.
All information exchanged between competent
authorities under this Regulation shall be considered confidential, except when
the competent authority states at the time of communication that the information
may be disclosed or where such disclosure is necessary for legal proceedings.

Article 22
Data protection

With regard to the
processing of personal data carried out by Member States within the framework
of this Regulation, competent authorities shall apply the
provisions of Directive 95/46/EC. With regard to the
processing of personal data by ESMA within the framework of this Regulation,
ESMA shall comply with the provisions of Regulation (EC) No 45/2001.

Personal data shall
be retained for a maximum period of 5 years.

Article 23
Disclosure of personal data to third countries

1.
The competent authority of a Member State may
transfer personal data to a third country provided the requirements of
Directive 95/46/EC, particularly of Articles 25 or 26, are fulfilled and only
on a case-by-case basis. The competent authority of the Member State shall ensure
that the transfer is necessary for the purpose of this Regulation. The
competent authority shall ensure that the third country does not transfer the
data to another third country unless it is given express written authorisation
and complies with the conditions specified by the competent authority of the
Member State. Personal data may only be transferred to
a third country which provides an adequate level of protection of personal data.

2.
The competent authority of a Member State
shall only disclose information received from a competent authority of another
Member State to a competent authority of a third country where the competent
authority of the Member State concerned has obtained express agreement of the
competent authority which transmitted the information and, where applicable,
the information is disclosed solely for the purposes for which that competent
authority gave its agreement.

3.
Where a cooperation agreement provides for the
exchange of personal data, it shall comply with Directive 95/46/EC.

CHAPTER 5
Administrative measures and sanctions

Article 24
Administrative measures and sanctions

1.
Member States shall lay down the rules on
administrative measures and sanctions applicable in the circumstances defined
in Article 25 to the persons responsible for breaches of the provisions of this
Regulation and shall take all measures necessary to ensure that they are
implemented. The measures and sanctions provided for shall be effective,
proportionate and dissuasive.

By [24 months after
entry into force of this Regulation] the Member
States shall notify the rules referred to in the first subparagraph to the
Commission and ESMA. They shall notify the Commission and ESMA without delay of
any subsequent amendment thereto.

2.
In the exercise of their sanctioning powers
under circumstances defined in Article 25, competent authorities shall
cooperate closely to ensure that the administrative measures and sanctions
produce the desired results of this Regulation and coordinate their action in
order to avoid possible duplication and overlap when applying administrative
measures and sanctions and fines to cross border cases in accordance with
Article 19

Article 25
Sanctioning powers

This Article shall apply in all the
following circumstances:

(a)
a person engages in insider dealing in breach of
Article 9;

(b)
a person recommends or induces another person to
engage in insider dealing in breach of Article 9;

(c)
a person improperly discloses insider
information in breach of Article 9;

(d)
a person engages in market manipulation in
violation of Article 10;

(e)
a person attempts to engage in market
manipulation in violation of Article 10;

(f)
a person who operates the business of a trading
venue of a trading venue fails to adopt and maintain effective arrangements and
procedures aimed at preventing and detecting market manipulation practices, in breach
of Article 11 (1) ;

(g)
a person professionally arranging or executing
transactions fails to have in place systems to detect and report transactions
that might constitute insider dealing, market manipulation or an attempt to
engage in market manipulation or fails to notify suspicious orders or transactions
to the competent authority without delay, in breach of Article 11 (2);

(h)
an issuer of a financial instrument or emission
allowance market participant, not exempted pursuant to the second subparagraph
of paragraph 2 of Article 12, fails to inform the public as soon as possible of
inside information or to post on its Internet site inside information to be
disclosed publicly, in breach of Article 12 (1);

(i)
an issuer of a financial instrument or an emission
allowance market participant, not exempted pursuant to the second subparagraph
of paragraph 2 of Article 12, delays the disclosure of inside information where
such a delay is likely to mislead the public or without ensuring the
confidentiality of that information, in breach of Article 12 (2);

(j)
an issuer of a financial instrument or an emission
allowance market participant, not exempted pursuant to the second subparagraph
of paragraph 2 of Article 12, fails to inform the competent authority that the
disclosure of inside information was delayed, in breach of Article 12 (2);

(k)
an issuer of a financial instrument or an
emission allowance market participant, or a person acting on their behalf or on
their account fails to disclose to the public the inside information disclosed
to any person in the normal exercise of duties resulting from employment or profession,
in breach of Article 12 (4);

(l)
an issuer of a financial instrument, an emission
allowance market participant, not exempted pursuant to the second subparagraph
of paragraph 2 of Article 12, or a person acting on their behalf or on their
account fails to draw up, regularly update or transmit to the competent
authority on request a list of insiders, in breach of Article 13 (1);

(m)
a person discharging managerial responsibilities
within an issuer of financial instruments, an emission allowance market
participant, not exempted pursuant to the second subparagraph of paragraph 2 of
Article 12, or a person closely associated with them fails to make public the
existence of transactions conducted on their own account, in breach of Article
14 (1) and (2);

(n)
a person producing or disseminating information
recommending or suggesting an investment strategy intended
for distribution channels or for the public fails to take reasonable care to
ensure the information is objectively presented or to disclose interests or
conflicts of interest, in breach of Article 15 (1);

(o)
a person who works or has worked for a competent
authority or for any authority or market undertaking to whom the competent
authority has delegated its tasks discloses information covered by professional
secrecy in breach of Article 21;

(p)
a person fails to grant the competent authority
access to a document and to provide a copy of it, requested
in accordance with Article 17 (2) (a);

(q)
a person fails to provide information or to
respond to a summons demanded by the competent authority in accordance with Article
17 (2) (b);

(r)
a market participant fails to provide competent
authority with information in relation to commodity derivatives or with suspicious
transaction reports or to grant direct access to traders' systems, requested in
accordance with Article 17 (2) (c);

(s)
a person fails to grant access to a site for
inspection, requested by the competent authority in accordance with Article 17
(2) (d) ;

(t)
a person fails to grant access to existing
telephone and data traffic records requested in accordance with Article 17 (2) (f);

(u)
a person fails to comply with a request by the
competent authority to cease a practice contrary to this Regulation, to suspend
trading of financial instruments or to publish a corrective statement;

(v)
a person carries out an activity when prohibited
from doing so by the competent authority.

Article 26
Administrative measures and sanctions

1.
Without prejudice to the supervisory powers of
competent authorities in accordance with Article 17, in case of a breach referred
to in paragraph 1, competent authorities shall, in conformity with national
law, have the power to impose at least the following administrative measures
and sanctions:

(a)
an order requiring the person responsible for the
breach to cease the conduct and to desist from a repetition of that conduct;

(b)
measures to be applied for failure to cooperate
in an investigation covered by Article 17;

(c)
measures which have the effect of putting an end
to a continuous breach of this Regulation and eliminating its effect;

(d)
a public statement which indicates the person
responsible and the nature of the breach, published on the website of competent
authorities;

(e)
correction of false or misleading disclosed
information including by requiring any issuer or other person who has published
or disseminated false or misleading information to publish a corrective
statement;

(f)
temporary prohibition of an activity;

(g)
withdrawal of the authorisation of an investment
firm as defined in Article 4 (1) of Directive [new MiFID];

(h)
a temporary ban against any member of an investment
firm's body or any other natural person, who is held responsible, to exercise functions
in investment firms;

(i)
suspend trading of the financial instruments
concerned;

(j)
request the freezing and/or sequestration of
assets;

(k)
administrative pecuniary sanctions of up to
twice the amount of the profits gained or losses avoided because of the breach where
those can be determined;

(l)
in respect of a natural person, administrative
pecuniary sanctions of up to [EUR 5 000 000] or in the Member States
where the Euro is not the official currency, the corresponding value in the
national currency on the date of entry to force of this Regulation;

(m)
in respect of a legal person, administrative
pecuniary sanctions of up to 10 % of its total annual turnover in the preceding
business year; where the legal person is a subsidiary of a parent undertaking [as
defined in Articles 1 and 2 of Directive 83/349/EEC], the relevant total annual
turnover shall be the total annual turnover resulting from the consolidated
account of the ultimate parent undertaking in the preceding business year.

2.
Competent authorities may have other sanctioning
powers in addition to those referred to in paragraph 2 and may provide for
higher levels of administrative pecuniary sanctions than those established in that
paragraph.

3.
Every administrative measure and sanction imposed
for breach of this Regulation shall be published without undue delay, including
at least information on the type and nature of the breach and the identity of
persons responsible for it, unless such publication would seriously jeopardise
the stability of financial markets. Where publication would cause
disproportionate damage to the parties involved, competent authorities shall
publish the measures and sanctions on an anonymous basis.

Article 27
Effective application of sanctions

1.
When determining the type of administrative
measures and sanctions, competent authorities shall take into account all
relevant circumstances, including:

(a)
the gravity and duration of the breach;

(b)
the degree of responsibility of the responsible
person;

(c)
the financial strength of the responsible
person, as indicated by the total turnover of the responsible legal person or
the annual income of the responsible natural person;

(d)
the importance of the profits gained or losses
avoided by the responsible person, insofar as they can be determined;

(e)
the level of cooperation of the responsible
person with the competent authority, without prejudice to the need to ensure
disgorgement of profits gained or losses avoided by that person;

(f)
previous breaches by the responsible person.

Additional factors may be taken into account by
competent authorities, if such factors are specified in national law.

2.
ESMA shall issue guidelines addressed to
competent authorities in accordance with Article 16 of Regulation No (EU) 1095/2010
on types of administrative measures and sanctions and level of fines.

Article 28
Appeal

Member States shall ensure that decisions
taken by the competent authority in accordance with this Regulation are subject
to the right of appeal.

Article 29
Reporting of violations

1.
Member States shall put in place effective
mechanisms to encourage reporting of breaches of this Regulation to competent
authorities, including at least:

(a)
specific procedures for the receipt of reports
of breaches and their follow-up;

(b)
appropriate protection for persons who report
potential or actual breaches;

(c)
protection of personal data concerning both the
person who reports the potential or actual breaches and the accused person in
compliance with the principles laid down in Directive 95/46/EC;

(d)
appropriate procedures to ensure the right of
the accused person of defence and to be heard before the adoption of a decision
concerning him and the right to seek effective judicial remedy against any decision
or measure concerning him.

2.
Financial incentives to persons who offer
salient information about potential breaches of this Regulation may be granted in
conformity with national law where such persons do not have a pre-existing
legal or contractual duty to report such information, that the information is
new, and it results in the imposition of an administrative sanction or measure
or a criminal sanction for a breach of this Regulation.

3.
The Commission shall adopt, by means of implementing
acts in accordance with Article 33, measures to specify
the procedures referred to in paragraph 1, including the modalities of
reporting and the modalities for following-up of reports, the measures for the
protection of persons.

Article 30
Exchange of information with ESMA

1.
Competent and judicial authorities shall provide
ESMA annually with aggregated information regarding all administrative
measures, sanctions and fines imposed in accordance with Articles 24, 25, 26,
27, 28 and 29. ESMA shall publish this information in an annual report.

2.
Where the competent authority has disclosed administrative
measures, sanctions and fines to the public, it shall simultaneously report those
administrative measures, sanctions and fines to ESMA.

3.
Where a published administrative measure,
sanction and fine relates to an investment firm authorised in accordance with
Directive [new MiFID], ESMA shall add a reference to the published sanction in
the register of investment firms established under Article 5(3) of Directive [new
MiFID].

4.
ESMA shall develop draft implementing technical standards
to determine the procedures and forms for
exchange of information as referred to in this Article.

ESMA shall submit the draft implementing technical
standards referred to in the first subparagraph to the Commission by [...].

Power is conferred to the Commission to adopt the
implementing technical standards referred to in the first subparagraph in
accordance with Article 15 of Regulation 1095/2010.

CHAPTER 6
DELEGATED ACTS

Article 31
Delegation of powers

The Commission shall be empowered to adopt delegated acts
in accordance with Article 32 concerning the
supplementing and amending of the conditions for buy-back programmes and
stabilisation of financial instruments, the definitions in this Regulation, the
conditions for drawing up insider lists, the conditions relating to managers'
transactions and the arrangements for persons who provide information that may
lead to the detection of breaches of this Regulation.

Article 32
Exercise of the delegation

1.
The power to adopt delegated acts is conferred on
the Commission subject to the conditions laid down in this Article.

2.
The delegation of power shall be conferred for an
indeterminate period of time from the date referred to in Article 36(1).

3.
The delegation of power may be revoked at any time
by the European Parliament or by the Council. A decision of revocation shall
put an end to the delegation of the power specified in that decision. It shall
take effect the day following the publication of the decision in the Official
Journal of the European Union or at a later date specified therein. It shall
not affect the validity of any delegated acts already in force.

4.
As soon as it adopts a delegated act, the
Commission shall notify it simultaneously to the European Parliament and to the
Council.

5.
A delegated act shall enter into force only if no
objection has been expressed either by the European Parliament or the Council
within a period of 2 months of notification of that act to the European
Parliament and the Council or if, before the expiry of that period, the
European Parliament and the Council have both informed the Commission that they
will not object. That period shall be extended by 2 months at the initiative of
the European Parliament or the Council.

CHAPTER 7
IMPLEMENTING ACTS

Article 33
Committee procedure

1.
For the adoption of implementing acts under
Article 29(3) the Commission shall be assisted by the European Securities
Committee established by Commission Decision 2001/528/EC[41].
That committee shall be a committee within the meaning of Regulation (EU) No
182/2011[42].

2.
Where reference is made to this paragraph,
Articles 5 of Regulation (EU) No 182/2011 shall apply, having regard to the
provisions of Article 8 thereof.

CHAPTER 8
TRANSITIONAL AND FINAL PROVISIONS

Article 34
Repeal of Directive 2003/6/EC

Directive 2003/6/EC shall be repealed with
effect from [24 months after entry into force of
this Regulation]. References to Directive 2003/6/EC
shall be construed as references to this Regulation.

Article 35
Transitional provisions

Market practices existing before the entry
into force of this Regulation and accepted by competent authorities in
accordance with Commission Regulation (EC) No 2273/2003[43]
for the purpose of applying point 2(a) of Article 1 of Directive 2003/6/EC, may
remain applicable until [12 months after entry into application of this
Regulation] provided that they are notified to ESMA by the competent
authorities concerned before the date of application of this Regulation.

Article 36
Entry into force and application

1.
This Regulation shall enter into force [on the twentieth
day following that] of its publication in the Official Journal of the European
Union.

2.
It shall apply from [24 months after entry into
force of this Regulation] except for Articles 3(2), , 8(5), 11(3), 12(9),
13(4), 13(6), 14(5), 14(6), 15(3), 18(9), 19(9), 28(3) and 29(3) which shall
apply immediately following the entry into force of this Regulation.

This Regulation shall be binding in its entirety and directly
applicable in all Member States.

Done at Brussels,

For the European Parliament                       For
the Council

The President                                                 The
President

ANNEX I

A.
Indicators of manipulative behaviour related to false or misleading signals and
to price securing

For the purposes of applying point (a) of paragraph
1 of Article 8 of this Regulation, and without prejudice to the forms of
behaviour set out in paragraph 3 thereof, the following non-exhaustive indicators,
which should not necessarily be deemed in themselves to constitute market manipulation,
shall be taken into account when transactions or orders to trade are examined
by market participants and competent authorities:

(a)
the extent to which orders to trade given or
transactions undertaken represent a significant proportion of the daily volume
of transactions in the relevant financial instrument, related spot commodity
contract, or auctioned product based on emission
allowances, in particular when these activities lead to
a significant change in their prices;

(b)
the extent to which orders to trade given or
transactions undertaken by persons with a significant buying or selling position
in a financial instrument, a related spot commodity contract, or a auctioned product based on emission allowances, lead to significant changes in the price of that financial
instrument, related spot commodity contract, or
auctioned product based on emission allowances;

(c)
whether transactions undertaken lead to no
change in beneficial ownership of a financial instrument, a related spot
commodity contract, or a auctioned product based on
emission allowances;

(d)
the extent to which orders to trade given or
transactions undertaken include position reversals in a short period and represent
a significant proportion of the daily volume of transactions in the relevant financial
instrument, a related spot commodity contract, or a auctioned
product based on emission allowances, and might be
associated with significant changes in the price of a financial instrument, a
related spot commodity contract, or a auctioned product
based on emission allowances;

(e)
the extent to which orders to trade given or
transactions undertaken are concentrated within a short time span in the
trading session and lead to a price change which is subsequently reversed;

(f)
the extent to which orders to trade given change
the representation of the best bid or offer prices in a financial instrument, a
related spot commodity contract, or a auctioned product
based on emission allowances, or more generally the
representation of the order book available to market participants, and are
removed before they are executed;

(g)
the extent to which orders to trade are given or
transactions are undertaken at or around a specific time when reference prices,
settlement prices and valuations are calculated and lead to price changes which
have an effect on such prices and valuations.

B.
Indicators of manipulative behaviours related to the employment of fictitious
devices or any other form of deception or contrivance

For the purposes of applying point (b) of
paragraph 1 of Article 8 of this Regulation, and without prejudice to the forms
of behaviour set out in the second paragraph of point 3 thereof, the following
non-exhaustive indicators, which should not necessarily be deemed in themselves
to constitute market manipulation, shall be taken into account when
transactions or orders to trade are examined by market participants and competent
authorities:

(a)
whether orders to trade given or transactions
undertaken by persons are preceded or followed by dissemination of false or
misleading information by the same persons or persons linked to them;

(b)
whether orders to trade are given or
transactions are undertaken by persons before or after the same persons or persons
linked to them produce or disseminate investment recommendations which are
erroneous or biased or demonstrably influenced by material interest.

LEGISLATIVE FINANCIAL STATEMENT
FOR PROPOSALS

1.           FRAMEWORK OF THE PROPOSAL/INITIATIVE

1.1.    Title of the proposal/initiative

1.2.    Policy
area(s) concerned in the ABM/ABB structure

1.3.    Nature
of the proposal/initiative

1.4.    Objective(s)

1.5.    Grounds
for the proposal/initiative

1.6.    Duration
and financial impact

1.7.    Management
method(s) envisaged

2.           MANAGEMENT MEASURES

2.1.    Monitoring
and reporting rules

2.2.    Management
and control system

2.3.    Measures
to prevent fraud and irregularities

3.           ESTIMATED FINANCIAL IMPACT OF THE
PROPOSAL/INITIATIVE

3.1.    Heading(s)
of the multiannual financial framework and expenditure budget line(s) affected

3.2.    Estimated
impact on expenditure

3.2.1. Summary of estimated impact on expenditure

3.2.2. Estimated
impact on operational appropriations

3.2.3. Estimated
impact on appropriations of an administrative nature

3.2.4. Compatibility
with the current multiannual financial framework

3.2.5. Third-party
participation in financing

3.3.    Estimated impact on revenue

LEGISLATIVE FINANCIAL STATEMENT FOR PROPOSALS

1.           FRAMEWORK OF THE PROPOSAL/INITIATIVE

1.1.        Title of the
proposal/initiative

Proposal for a Regulation of the European Parliament and of the
Council on insider dealing and market manipulation (market abuse)

Proposal for a Directive of the European Parliament and of the
Council on criminal sanctions for insider dealing and market manipulation
(market abuse)

1.2.        Policy area(s) concerned
in the ABM/ABB structure[44]

Internal Market – Financial markets

1.3.        Nature of the
proposal/initiative

ý The
proposal/initiative relates to a new action

 ̈ The
proposal/initiative relates to a new action following a pilot
project/preparatory action[45]

 ̈ The
proposal/initiative relates to the extension of an existing action

 ̈ The
proposal/initiative relates to an action redirected towards a new action

1.4.        Objectives

1.4.1.     The Commission's
multiannual strategic objective(s) targeted by the proposal/initiative

The general objectives of the Market Abuse Regulation and Directive are
to increase market integrity and investor protection by prohibiting those who
possess inside information from trading in related financial instruments, and
by prohibiting the manipulation of financial markets through practices such as
spreading false information or rumours and conducting trades which secure
prices at abnormal levels while ensuring a single rulebook and level playing
field and increasing the attractiveness of securities markets for capital
raising for issuers on SME growth markets.

1.4.2.     Specific objective(s) and
ABM/ABB activity(ies) concerned

Specific objective No..

In the light of the general objectives above, the following more
specific policy objectives are relevant:

- Ensure Regulation and Directive keep pace with market
developments;

- Ensure effective enforcement of market abuse rules;

- Enhance the effectiveness of the market abuse regime by ensuring
greater clarity and legal certainty;

- Reduce administrative burdens where possible, especially for
issuers on SME markets.

ABM/ABB activity(ies) concerned

The specific objectives listed above require the attainment of the
following operational objectives:

- Prevent market abuse on organised markets, platforms & OTC
transactions;

- Prevent market abuse on commodities and related derivatives
markets;

- Ensure regulators have necessary information and powers to enforce
effectively;

- Ensure consistent, effective and dissuasive sanctions;

- Reduce or eliminate options and discretions;

- Clarify certain key concepts.

1.4.3.     Expected result(s) and
impact

Specify the effects
which the proposal/initiative should have on the beneficiaries/groups targeted.

The overall impact of the proposals will lead to considerable
improvements in addressing market abuse within the EU. First of all, market
integrity and investor protection will be improved by clarifying which
financial instruments and markets are covered, ensuring that instruments
admitted to trading only on a MTF and other new types of organised trading
facilities are covered. In addition it will improve protection against market
abuse in commodity derivatives by improved market transparency. In addition
they will ensure better detection of market abuse by offering the necessary
powers to competent authorities to perform investigations and improve the
deterrence of sanctioning regimes by introducing minimum principles for
administrative measures of sanctions and requiring for the introduction of
criminal sanctions. Furthermore, it will lead to a more coherent approach regarding
market abuse by reducing options and discretions for member States and will
introduce a proportionate regime for issuers on SME growth markets. Overall, it
is expected to contribute to the improved integrity of financial markets which
will have a positive impact on investors' confidence and this will further
contribute to the financial stability of financial markets.

1.4.4.     Indicators of results and
impact

Specify the
indicators for monitoring implementation of the proposal/initiative.

The main indicators and sources of information that could be used in
the evaluation are as follows:

- Data from national competent authorities on the number of market
abuse cases they have investigated and sanctioned; and

- A report (which could be undertaken by ESMA) on the experience
gained by regulators in enforcing the legislation.

1.5.        Grounds for the
proposal/initiative

1.5.1.     Requirement(s) to be met in
the short or long term

Short Term:

- Ensure regulators have necessary information and powers to enforce
effectively;

- Ensure consistent, effective and dissuasive sanctions;

- Reduce or eliminate options and discretions;

- Clarify certain key concepts.

Long Term:

- Prevent market abuse on organised markets, platforms & OTC
transactions;

- Prevent market abuse on commodities and related derivatives
markets.

1.5.2.     Added value of EU
involvement

Although all the problems outlined in the Impact Assessment have
important implications for each individual Member State, their overall impact
can only be fully perceived in a cross-border context. This is because market
abuse can be carried out wherever that instrument is listed, or over the
counter, so even in markets other than the primary market of the instrument
concerned. Therefore there is a real risk of national responses to market abuse
being circumvented or ineffective in the absence of EU level action. Further, a
consistent approach is essential in order to avoid regulatory arbitrage and
since this issue is already covered by the acquis of the existing Market Abuse
Directive addressing the problems highlighted in the Impact Assessment can best
be achieved in a common effort.

1.5.3.     Lessons learned from
similar experiences in the past

The proposal for this Regulation builds on the existing Market Abuse
Directive which has shown some limits in its application and has been applied
in different ways among Member States leading to the need of a review in the
form of a Regulation and a Directive.

1.5.4.     Coherence and possible
synergy with other relevant instruments

As announced in its Communication of 2 June 2010 on Regulating
Financial Services for Sustainable Growth,[46] the
Commission will complete its full financial reform programme in the coming
months. Of the existing or pending proposals listed in the Communication, a
number are related to this initiative and will contribute to achieving its
objectives of improving investor protection and enhancing market transparency
and integrity.

The proposal for a Regulation on short selling and certain aspects
of Credit Default Swaps includes a short selling disclosure regime which would
make it easier for regulators to detect possible cases of market manipulation
or insider dealing linked to short selling.[47]

The proposal for a regulation on OTC derivatives, central
counterparties and trade repositories will also increase transparency of
significant positions in OTC derivatives which will assist regulators to
monitor for market abuse through the use of derivatives.[48]

The review of the Markets in Financial Instruments Directive will
consider options to widen the current scope of reporting in relation to
transactions in instruments only traded on multilateral trading facilities
(MTFs) and reporting on over the counter (OTC) transactions including
derivatives. The reporting to competent authorities of OTC transactions in
instruments not admitted to trading on a regulated market is not currently
mandatory, and such reporting would make it easier for regulators to detect
possible market abuse through such instruments.[49]

The issues of transparency requirements and manipulative behaviours
specific to physical energy markets, as well as transaction reporting to ensure
the integrity of energy markets, are the subject of the Commission proposal for
a Regulation on energy market integrity and transparency.[50]

1.6.        Duration and financial
impact

 ̈ Proposal/initiative of limited
duration

–
 ̈  Proposal/initiative in effect from [DD/MM]YYYY to [DD/MM]YYYY

–
 ̈  Financial impact from YYYY to YYYY

ý Proposal/initiative of unlimited
duration

–
Implementation with a start-up period from YYYY
to YYYY,

–
followed by full-scale operation.

1.7.        Management mode(s)
envisaged[51]

ý Centralised direct management by the Commission

 ̈ Centralised indirect management with the delegation of implementation tasks to:

–
 ̈  executive agencies

–
 ̈  bodies set up by the Communities[52]

–
 ̈  national public-sector bodies/bodies with public-service mission

–
 ̈  persons entrusted with the implementation of specific actions
pursuant to Title V of the Treaty on European Union and identified in the relevant
basic act within the meaning of Article 49 of the Financial Regulation

 ̈ Shared management with the Member States

 ̈ Decentralised management with third countries

 ̈ Joint management with international organisations (to be specified)

If more than one
management mode is indicated, please provide details in the
"Comments" section.

Comments

//

2.           MANAGEMENT MEASURES

2.1.        Monitoring and reporting
rules

Specify frequency
and conditions.

Article 81 of the Regulation establishing the European Securities
and Markets Authority provides for evaluation of the experience acquired as a
result of the operation of the Authority within three years from the effective
start of its operation. To this end, the Commission shall publish a general
report that shall be forwarded to the European Parliament and to the Council.

2.2.        Management and control
system

2.2.1.     Risk(s) identified

An Impact Assessment has been carried out for the reform the
financial supervision system in the EU to accompany the Regulations establishing
the European Banking Authority, the European Insurance and Occupational
Pensions Authority and the European Securities Markets Authority.

The additional resource to ESMA foreseen as a result of the current
proposals is needed in order to allow ESMA to carry out its competences.

1.       ESMA will ensure harmonization and coordination of rules in
respect of:

- Exemption for buy-back programmes and stabilization (Article 3);

- Technical arrangements for the detection and notification of suspicious
transactions (Article 11);

- Technical means for appropriate public disclosure of inside
information (Article 12);

- Technical means for delaying the public disclosure of inside
information (Article 12);

- An indicative and non-exhaustive list of events relating to
issuers whose financial instruments are admitted to trading on an SME market
that might constitute inside information (Article 12);

- Content and format of insider lists (Article 13);

- Arrangements relating to investment recommendations and statistics
(Article 15);

- Procedures and forms for exchange of information among EU and
foreign competent and regulatory authorities (Articles 18, 19, 20, 29).

2.       Moreover, if requested by one competent authority ESMA will
coordinate investigations and inspections among competent authorities for
cross-border cases of market abuse (Article 19).

3.       ESMA will also coordinate the development of cooperation
arrangements between the competent authorities of Member States and the
relevant competent authorities of third countries. ESMA will prepare template
documents for cooperation arrangements that may be used by competent
authorities. ESMA will also coordinate the exchange between authorities of
information obtained from competent authorities of third countries (Article 20).

4.       Finally, in relation to derivatives on commodities, ESMA
will perform a facilitation and coordination role for the cooperation and
exchange of information between competent authorities and regulatory
authorities in other Member States and third countries responsible for the spot
markets (Article 19).

The lack of this resource could not ensure a timely and efficient
fulfilment of the role of the Authority.

2.2.2.     Control method(s) envisaged

Management and control systems as provided for in the ESMA
Regulation will apply also with regard to the role of ESMA according to the
present proposal. The final set of indicators to assess the performance of the
European Securities and Markets Authority will be decided by the Commission at
the time of conducting the first required evaluation. For the final assessment,
the quantitative indicators will be as important as the qualitative evidence
gathered in the consultations. The evaluation shall be repeated every three
years.

2.3.        Measures to prevent fraud
and irregularities

Specify existing or
envisaged prevention and protection measures.

For the purposes of combating fraud, corruption and any other
illegal activity, the provisions of Regulation (EC) No 1073/1999 of the
European Parliament and of the Council of 25 May 1999 concerning investigations
conducted by the European Anti-Fraud Office (OLAF) shall apply to the ESMA
without any restriction.

The Authority shall accede to the Inter-institutional Agreement of
25 May 1999 between the European Parliament, the Council of the European Union
and the Commission of the European Communities concerning internal
investigations by the European Anti-Fraud Office (OLAF) and shall immediately
adopt appropriate provisions for all staff of the Authority.

The funding decisions and the agreements and the implementing
instruments resulting from them shall explicitly stipulate that the Court of
Auditors and OLAF may, if need be, carry out on-the-spot checks on the
beneficiaries of monies disbursed by the Authority as well as on the staff
responsible for allocating these monies.

3.           ESTIMATED FINANCIAL IMPACT OF THE
PROPOSAL/INITIATIVE

3.1.        Heading(s) of the
multiannual financial framework and expenditure budget line(s) affected

· Existing expenditure budget lines

In order of
multiannual financial framework headings and budget lines.

Heading of multiannual financial framework || Budget line || Type of expenditure || Contribution

Number [Description........................................] || Diff./non-diff ([53]) || from EFTA[54] countries || from candidate countries[55] || from third countries || within the meaning of Article 18(1)(aa) of the Financial Regulation

|| 12.040401.01 ESMA – Subsidy under Titles 1 and 2 (Staff and administrative expenditure) || Diff. || YES || NO || NO || NO

· New budget lines requested

In order of multiannual financial framework
headings and budget lines.

///

3.2.        Estimated impact on
expenditure

3.2.1.     Summary of estimated impact
on expenditure

EUR million (to 3 decimal places)

Heading of multiannual financial framework: || 1A || Competitiveness for Growth and Employment

DG: <MARKT> || || || Year 2013[56] || Year 2014 || Year 2015 || || || TOTAL

Ÿ Operational appropriations || || || || || || || ||

12.0404.01 || Commitments || (1) || 0,179 || 0,327 || 0,327 || || || || || 0.832

Payments || (2) || 0,179 || 0,327 || 0,327 || || || || || 0.832

Appropriations of an administrative nature financed from the envelope for specific programmes[57] || || || || || || || ||

Number of budget line || || (3) || 0 || 0 || 0 || || || || ||

TOTAL appropriations for DG MARKT || Commitments || =1+1a +3 || 0,179 || 0,327 || 0,327 || || || || || 0.832

Payments || =2+2a +3 || 0,179 || 0,327 || 0,327 || || || || || 0.832

Ÿ TOTAL operational appropriations || Commitments || (4) || 0 || 0 || 0 || || || || ||

Payments || (5) || 0 || 0 || 0 || || || || ||

Ÿ TOTAL appropriations of an administrative nature financed from the envelope for specific programmes || (6) || 0 || 0 || 0 || || || || ||

TOTAL appropriations under HEADING 1A of the multiannual financial framework || Commitments || =4+ 6 || 0,179 || 0,327 || 0,327 || || || || || 0.832

Payments || =5+ 6 || 0,179 || 0,327 || 0,327 || || || || || 0.832

1.
ESMA will have to draft a certain number of
draft implementing technical standards in respect of:

–
Exemption for buy-back programmes and
stabilization (Article 3);

–
Technical arrangements for the detection and
notification of suspicious transactions (Article 11);

–
Technical means for appropriate public
disclosure of inside information (Article 12);

–
Technical means for delaying the public
disclosure of inside information (Article 12);

–
An indicative and non-exhaustive list of events
relating to issuers whose financial instruments are admitted to trading on an
SME market that might constitute inside information (Article 12);

–
Content and format of insider lists (Article 13);

–
Arrangements relating to investment
recommendations and statistics (Article 15);

–
Procedures and forms for exchange of information
among EU and foreign competent and regulatory authorities (Articles 18, 19, 20,
29).

2.
If requested by one competent authority ESMA
will coordinate investigations and inspections among competent authorities for
cross-border cases of market abuse.

3.
ESMA will coordinate the development of
cooperation arrangements between the competent authorities of Member States and
the relevant competent authorities of third countries. ESMA will prepare
template documents for cooperation arrangements that may be used by competent
authorities. ESMA will also coordinate the exchange between authorities of
information obtained from competent authorities of third countries.

4.
4.         In relation to derivatives on
commodities, ESMA will perform a facilitation and coordination role for the
cooperation and exchange of information between competent authorities and
regulatory authorities in other Member States and third countries responsible
for the spot markets.

If more than one heading is affected by the proposal /
initiative:

Ÿ TOTAL operational appropriations || Commitments || (4) || || || || || || || ||

Payments || (5) || || || || || || || ||

Ÿ TOTAL appropriations of an administrative nature financed from the envelope for specific programmes || (6) || || || || || || || ||

TOTAL appropriations under HEADINGS 1 to 4 of the multiannual financial framework (Reference amount) || Commitments || =4+ 6 || 0,179 || 0,327 || 0,327 || || || || || 0.832

Payments || =5+ 6 || 0,179 || 0,327 || 0,327 || || || || || 0.832

Heading of multiannual financial framework: || 5 || " Administrative expenditure "

EUR million (to 3 decimal places)

|| || || Year 2013 || Year 2014 || Year 2015 || || || TOTAL

DG: <.......> ||

Ÿ Human resources || 0 || 0 || 0 || || || || ||

Ÿ Other administrative expenditure || 0 || 0 || 0 || || || || ||

TOTAL DG <.......> || Appropriations || || || || || || || ||

TOTAL appropriations under HEADING 5 of the multiannual financial framework || (Total commitments = Total payments) || 0 || 0 || 0 || || || || ||

EUR million (to 3 decimal places)

|| || || Year 2013[58] || Year 2014 || Year 2015 || || || TOTAL

TOTAL appropriations under HEADINGS 1 to 5 of the multiannual financial framework || Commitments || 0,179 || 0,327 || 0,327 || || || || || 0.832

Payments || 0,179 || 0,327 || 0,327 || || || || || 0.832

3.2.2.     Estimated impact on
operational appropriations

–
 ̈  The proposal/initiative does not require the use of operational
appropriations

–
ý  The proposal/initiative requires the use of operational
appropriations, as explained below:

The specific objectives of the proposal
are set out under 1.4.2. They will be reached through the legislative measures
proposed, to be implemented at national level, and through the involvement of
the European Securities and Markets Authority.

In particular, although it is not possible
to attribute concrete numerical outputs to each operational objective, ESMA role,
coupled with new powers for national regulators, should contribute to increasing
market integrity and investor protection by prohibiting those who possess
inside information from trading in related financial instruments, and by
prohibiting the manipulation of financial markets through practices such as
spreading false information or rumours and conducting trades which secure
prices at abnormal levels. This new framework will prevent market abuse on
organised markets, platforms & OTC transactions, and on commodities and
related derivatives markets. Moreover, it will ensure ESMA and the national
regulators have necessary information and powers to enforce consistent,
effective and dissuasive sanctions.

3.2.3.     Estimated impact on
appropriations of an administrative nature

3.2.3.1.  Summary

–
ý  The proposal/initiative does not require the use of administrative
appropriations

–
 ̈  The proposal/initiative requires the use of administrative
appropriations, as explained below:

3.2.3.2.  Estimated requirements of
human resources

–
ý  The proposal/initiative does not require the use of human
resources

–
 ̈  The proposal/initiative requires the use of human resources, as
explained below:

Comment:

No additional human and administrative
resources will be needed in DG MARKT as a result of the proposal. Resources
currently deployed to follow the MAD will continue to do so.

3.2.4.     Compatibility with the
current multiannual financial framework

–
 ̈  Proposal/initiative is compatible the current multiannual
financial framework.

–
ý  Proposal/initiative will entail reprogramming of the relevant
heading in the multiannual financial framework.

The proposal provides for extra tasks to be
carried out by ESMA. This will require additional resources under budget line
12.0404.01

–
 ̈  Proposal/initiative requires application of the flexibility
instrument or revision of the multiannual financial framework[59].

Explain what is required, specifying the
headings and budget lines concerned and the corresponding amounts.

3.2.5.     Third-party contributions

–
 ̈  The proposal/initiative does not provide for co-financing by third
parties

–
ý  The proposal/initiative provides for the co-financing estimated
below:

Appropriations in EUR million (to 3 decimal places)

|| Year 2013 || Year 2014 || Year 2015 || || || Total

Specify the co-financing body Member States via EU national supervisors (*) || 0,268 || 0,490 || 0,490 || || || || || 1,248

TOTAL appropriations cofinanced || 0,268 || 0,490 || 0,490 || || || || || 1,248

(*) Estimation based on current financing
mechanism in draft ESMA regulation (Member States 60% - Community 40%).

3.3.        Estimated impact on
revenue

–
ý  Proposal/initiative has no financial impact on revenue.

–
 ̈  Proposal/initiative has the following financial impact:

·
 ̈         on own resources

·
 ̈         on miscellaneous revenue

Annex to Legislative Financial Statement
for proposal for a Regulation of the European Parliament and of the Council on
insider dealing and market manipulation (market abuse) and for a Directive of
the European Parliament and of the Council on criminal sanctions for insider
dealing and market manipulation (market abuse).

Applied methodology and main underlying
assumptions

The costs related to tasks to be carried
out by ESMA stemming from the two proposals have been estimated for staff
expenditure (Title 1), in conformity with the cost classification in the ESMA
draft budget for 2012 submitted to the Commission.

The two proposals of the Commission include
provisions for ESMA to develop some 11 sets of new binding technical standards
(BTS) that should ensure that provisions of highly technical nature are
consistently implemented across the EU. According to the proposals, ESMA is expected
to deliver the new BTS 24 months after entry into force of the Regulation. To
meet this goal, increase in staffing level is required already starting with
2013. As regards the nature of positions, the successful and timely delivery of
new BTS will require, in particular, additional policy, legal and impact
assessment officers.

Based on the estimates of the Commission
services and ESMA, the following assumptions were applied to assess the impact
on number of FTEs required to develop BTS related to the two proposals:

- One policy officer, one impact assessment
officer, and one legal officer are needed by 2013.

Hence, delivery of BTS that are falling due
24 months after entry into force of the Regulation requires 3 FTEs.

Lastly ESMA would be entrusted with some permanent
tasks in the field of:

- coordination of investigations and
inspections among competent authorities for cross-border cases of market abuse;

- development of cooperation arrangements
between the competent authorities of Member States and the relevant competent
authorities of third countries. ESMA will prepare template documents for
cooperation arrangements that may be used by competent authorities. ESMA will
also coordinate the exchange between authorities of information obtained from
competent authorities of third countries;

- facilitation and coordination role for
the cooperation and exchange of information between competent authorities and
regulatory authorities in other Member States and third countries responsible
for the spot markets and emission allowances.

Overall this means an additional 6 FTEs are
needed.

Other assumptions:

–
based on the distribution of FTEs in 2012 draft
budget, additional 6 FTEs are assumed to be comprised of 3 temporary agents (50%),
2 seconded national expert (33,3%) and 1 contractual agent (16.7%);

–
average annual salary costs for different
categories of personnel are based on DG BUDG guidance;

–
salary weighting coefficient for Paris of 1.27;

–
training costs assumed at €1,000 per FTE per
year;

–
mission costs of €10,000, estimated based on
2012 draft budget for missions per headcount;

–
recruiting-related costs (travel, hotel, medical
examinations, installation and other allowances, removal costs, etc) of
€12,700, estimated based on 2012 draft budget for recruiting per new headcount.

It was assumed that the workload behind the
above increase in FTEs will be maintained in 2014 onwards, and is linked to
amending the already developed BTS.

The method of calculating the increase in
the required budget for the next three years is presented in more detail in
table below. The calculation reflects the fact that that the Community budget
funds 40% of the costs.

Cost type || Calculation || Amount (in thousands)

2013 || 2014 || 2015 || Total

|| || || || ||

Title 1: Staff expenditure || || || || ||

|| || || || ||

6 Salaries and allowances || || || || ||

- of which temporary agents || =3*127*1,27 || 241.93 || 483.87 || 483.87 || 1209.67

- of which SNEs || =2*73*1,27 || 92.71 || 185.42 || 185.42 || 463.55

- of which contract agents || =1*64*1,27 || 40.64 || 81.28 || 81.28 || 203.2

|| || || || ||

6 Expenditure related to recruitment || || || || ||

|| =6*12,7 || 76.2 || || || 76.2

|| || || || ||

6 Mission expenses || || || || ||

|| =6*10 || 30 || 60 || 60 || 150

|| || || || ||

6 Training || =6*1 || 3 || 6 || 6 || 15

|| || || || ||

Total Title 1: Staff expenditure || || 484.48 || 816.57 || 816.57 || 2079.53

|| || || || ||

Of which Community contribution (40%) || || 193.79 || 326.63 || 326.63 || 847.05

Of which Member State contribution (60%) || || 290.68 || 489.94 || 489.94 || 1270.56

The following table presents the proposed
establishment plan for the three temporary agent positions:

Function Group and Grade || Temporary Posts

AD16 AD15 AD14 AD13 AD12 AD11 AD10 AD9 AD8 AD7 AD6 AD5 AD Total || 1 2 3

[1]               OJ L 16, 12.4.2003, p.16.

[2]               Report of the High-Level Group on Financial
Supervision in the EU, Brussels, 25.2.2009, p.23.

[3]               European Commission, Communication on Ensuring
efficient, safe and sound derivatives markets, COM (2009) 332, 3 July 2009.

[4]               European Commission, Communication on Review of
the "Small Business Act" for Europe, COM (2011) 78, 23 February
2011.

[5]               European Commission, Communication on Reinforcing
sanctioning regimes in the financial sector, COM (2010) 716, 8 December
2010.

[6]               Ref.
CESR/07-380, June 2007, available at www.cesr-eu.org.

[7]               Ref. CESR/09-1120.

[8]               ESME
is an advisory body to the Commission, composed of securities markets
practitioners and experts, whose mandate expired at the end of 2009 and was not
renewed. It was established by the Commission in April 2006 and operated on the
basis of the Commission Decision 2006/288/EC of 30 March 2006 setting up a
European Securities Markets Expert Group to provide legal and economic advice
on the application of the EU securities Directives (OJ L 106, 19.4.2006, p.
14–17).

[9]               Issued in June 2007 and entitled "market
abuse EU legal framework and its implementation by Member States: a first
evaluation".

[10]             See http://ec.europa.eu/internal_market/securities/abuse/12112008_conference_en.htm.

[11]             See
http://ec.europa.eu/internal_market/consultations/2009/market_abuse_en.htm

[12]             See http://ec.europa.eu/internal_market/consultations/docs/2010/mad/consultation_paper.pdf

[13]             See http://ec.europa.eu/internal_market/consultations/2010/mad_en.htm

[14]             The impact assessment report can be found on XXX.

[15]             See Annex 3 of the impact assessment report for a
summary of the discussions.

[16]             COM(2009) 501, COM(2009) 502,
COM(2009) 503.

[17]             Directive 2004/39/EC of the European Parliament and of
the Council of 21 April 2004 on markets in financial instruments. OJ L 145, 30.4.2004.

[18]             http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=COM:2010:0726:FIN:EN:PDF

[19]             CESR answer to the call for evidence on the review of
the MAD, of 20 April 2009, available at

http://ec.europa.eu/internal_market/securities/abuse/index_en.htm

[20]             (COM (2010) 1496) Communication from the Commission to
the European Parliament, the Council, the European Economic and Social Committee
and the Committee of the Regions reinforcing sanctioning regimes in the
financial services sector, December 2010, Chapter 3.

[21]             OJ C [...], [...], p. [...].

[22]             OJ C , , p. .

[23]             OJ C , , p. .

[24]             OJ L 16, 12.4.2003, p.16.

[25]             Report of the High-Level Group on Financial
Supervision in the EU, Brussels, 25.2.2009.

[26]             Commission Communication ‘Think Small First’ - A ‘Small
Business Act’ for Europe, COM(2008) 394 final.

[27]             Commission Regulation (EU) No 1031/2010 of 12 November
2010. on the timing, administration and other aspects of auctioning of
greenhouse gas emission allowances pursuant to Directive 2003/87/EC of the
European Parliament and the Council establishing a scheme for greenhouse gas
emission allowances trading within the Community, OJ L 302, 18.11.2010, p. 1.

[28]             OJ L 281, 23.11.1995, p. 31.

[29]             OJ L 8, 12.1.2001, p. 1.

[30]             European Commission, Communication on Reinforcing sanctioning
regimes in the financial sector, COM (2010) 716, 8 December 2010.

[31]             OJ L 336, 23.12.2003, p. 33.

[32]             OJ L 281, 23.11.1995, p. 31.

[33]             OJ L 8, 12.1.2001, p. 1.

[34]             Commission Regulation (EU) No 1031/2010 of 12 November
2010. on the timing, administration and other aspects of auctioning of
greenhouse gas emission allowances pursuant to Directive 2003/87/EC of the
European Parliament and the Council establishing a scheme for greenhouse gas
emission allowances trading within the Community, OJ L 302, 18.11.2010, p. 1.

[35]             Commission Regulation (EC) No 1287/2006 of 10 August
2006 implementing Directive 2004/39/EC of the European Parliament and of the
Council as regards record-keeping obligations for investment firms, transaction
reporting, market transparency, admission of financial instruments to trading,
and defined terms for the purposes of that Directive. [OJ L 241, 2.9.2006, p. 1].

[36]             Second Council Directive 77/91/EEC of 13 December 1976
on coordination of safeguards which, for the protection of the interests of
members and others, are required by Member States of companies within the
meaning of the second paragraph of Article 58 of the Treaty, in respect of the
formation of public limited liability companies and the maintenance and
alteration of their capital, with a view to making such safeguards equivalent.
[OJ L 26, 31.1.1977, p. 1].

[37]             Directive 2003/71/EC of the European Parliament and of
the Council of 4 November 2003 on the prospectus to be published when
securities are offered to the public or admitted to trading and amending
Directive 2001/34/EC. OJ L 345, 31.12.2003, p. 64.

[38]             Regulation (EC) No 713/2009 of the European Parliament
and of the Council of 13 July
2009 establishing an Agency for the Cooperation of Energy Regulators. OJ L 211,
14.8.2009, p.1.

[39]             Regulation (EU) No...of the European Parliament and the
Council on Wholesale Energy Market Integrity and Transparency

[40]             Regulation (EU) No...of the European Parliament and the
Council on Wholesale Energy Market Integrity and Transparency

[41]             OJ L 191, 13.7.2001, p.45.

[42]             OJ L 55, 28.2.2011, p.13.

[43]             OJ L 162, 29.04.2004, p. 72.

[44]             ABM: Activity-Based Management – ABB: Activity-Based
Budgeting.

[45]             As referred to in Article 49(6)(a) or (b) of the
Financial Regulation.

[46]             (COM (2010) 301) Communication from the Commission to
the European Parliament, the Council, the European Economic and Social Committee
and the European Central Bank regulating financial services for sustainable
growth, June 2010.

[47]             (COM(2010) 482) Proposal for a Regulation of the
European Parliament and of the Council on short selling and certain aspects of
credit default swaps, September 2010.

[48]             COM(2010) 484) Proposal for a Regulation of the
European Parliament and of the Council on OTC derivatives, central
counterparties and trade repositories, September 2010.

[49]             (COM(2011) XXX)

[50]             COM(2010) 484) Proposal for a Regulation of the
European Parliament and of the Council on energy market integrity and
transparency, December 2010.

[51]             Details of management modes and references to the
Financial Regulation may be found on the BudgWeb site: http://www.cc.cec/budg/man/budgmanag/budgmanag_en.html

[52]             As referred to in Article 185 of the Financial
Regulation.

[53]             Diff. = Differentiated appropriations / Non-Diff. =
Non-differentiated appropriations

[54]             EFTA: European Free Trade Association.

[55]             Candidate countries and, where applicable, potential
candidate countries from the Western Balkans.

[56]             Year N is the year in which implementation of the proposal/initiative
starts.

[57]             Technical and/or administrative assistance and
expenditure in support of the implementation of EU programmes and/or actions
(former "BA" lines), indirect research, direct research.

[58]             Year N is the year in which implementation of the
proposal/initiative starts.

[59]             See points 19 and 24 of the Interinstitutional
Agreement.