AIMA

The Alternative Investment Management Association

Alternative Investment Management Association Representing the global hedge fund industry

MAD / MAR

Directive 2003/6/EC on insider dealing and market manipulation (MAD) was adopted by the European Parliament and Council of the European Union on 28 January 2003, with Members States required to implement its provisions by 12 October 2004. Further details are contained within the relevant Level II implementing directives and regulation.

Until MAD, only insider dealing was covered by EU harmonised rules. MAD built upon these existing rules by introducing a common EU legal framework to combat both insider dealing and market manipulation and ensure appropriate administrative sanctions are applied when the rules are breached. It also established a common framework for the disclosure of information to the market.

On 20 October 2011, the European Commission adopted proposals for (i) a revised Directive dealing with criminal sanctions against market abuse (MADII) and (ii) a new Regulation dealing with administrative measures against such abuse (MAR). The two proposals sought to:

  • extend the scope of the current market abuse regime to cover financial instruments traded on new categories of platform and OTC;
  • more closely align the way in which market abuse rules apply to commodity derivative and underlying spot markets (in particular, the application of inside information and insider dealing rules to commodity derivative markets and market manipulation rules to both spot commodity and commodity derivative markets);
  • include improper activities relating to benchmarks within the scope of market manipulation;
  • introduce offences of attempted insider dealing and market manipulation;
  • ensure national competent authorities have a minimum set of investigative and enforcement powers, including the power to enter private premises, seize documents and access telephone records; and
  • establish a harmonised regime of minimum criminal and administrative sanctions across the EU Member States.

The European Parliament and Council voted through their versions of the Commission's MAR proposals on 8 October 2012 and 5 December 2012, respectively. Trialogue negotiations between all three EU legislative institutions commenced subsequently on 2 January 2013, with a political agreement for a Level 1 MAR text being reached on 20 June 2013. The Level 1 MAR text is now undergoing a technical review to ensure drafting consistency. The European Parliament and Council approved their respective MADII texts on 8 October 2012 and 12 December 2012. Trialogue negotiations on MADII, however, experienced delays whilst MAR was negotiated. A Trialogue agreement on a Level 1 MADII text was reached on 19 December 2013.

A number of provisions in both MAR and MADII are dependent on the Level 1 texts of the amended Directive and new Regulation on markets in financial instruments (MiFIDII/MiFIR). This means that MAR and MADII are unlikely to be formally adopted until an agreement on the latter has been reached. It is hoped that the Level 1 MiFIDII/MiFIR texts will be finalised and MAR and MADII subsequently adopted and published in the Official Journal of the European Union by Q2 2014.

In November 2013, ESMA published a discussion paper on its policy orientations on possible Level 2 implementing measures for MAR. AIMA submitted a response. Subsequent Level 2 consultations are expected to be conducted by ESMA during the course of Q2 and Q3 of 2014.

 


Key legislative documents

MAD

LEVEL I

Directive 2003/6/EC

LEVEL II

Directive 2004/72/EC

Regulation No. 2273/2003

Directive 2003/124/EC

Directive 2003/125/EC

MAD II / MAR

MADII

Political Agreement on MADII (December 2013)

MAR

Political agreement between EP and Council on MAR (June 2013)


 

Relevant consultations

Discussion Paper on ESMA’s policy orientations on possible implementing measures under the Market Abuse Regulation (November 2013)

European Commission Impact Assessment MAD II (October 2011)

European Commission Public Consultation: A Revision of the Market Abuse Directive (June 2010)

Call for Evidence – Review of Directive 2003/6/EC on insider dealing and market manipulation (Market Abuse Directive) (April 2009)


AIMA documents

AIMA Response to ESMA's consultation paper - policy orientations on possible implementing measures under the Market Abuse Regulation (January 2014)

AIMA Summary of the Market Abuse Regulation Trialogue Position (September 2013)

AIMA Note on the progress of the European Commission's draft proposal for a regulation on insider dealing and market manipulation - MAR (March 2013)

AIMA Comparison of the European Commission's proposal for a Market Abuse Regulation (January 2013)

AIMA Position Paper (February 2012)

AIMA Response to the European Commission’s Public Consultation on a Revision of the Market Abuse Directive (July 2010)

AIMA Response to the Call For Evidence Review of Directive 2003/6/EC on insider dealing and market manipulation (Market Abuse Directive) (June 2009)


Other resources

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      1. AIFMD
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        1. ETFs and Structured UCITS
      5. Venture Capital
    2. US Hedge Fund Adviser Regulations
      1. Registration and Reporting
      2. Incentive-Based Compensation
      3. JOBS Act
    3. Asia Pacific Asset Management regulation
    4. Other Jurisdictions’ Asset Management Regulation
    5. Regulation of NBFCs / SIFIS
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      1. UK regulatory reform
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      3. US Self-Regulatory Organisations
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      1. UK
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      6. Germany
      7. CFTC Automated Trading
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