13 March 2017

Implementation of Market Abuse Regulation enters final phase

A recently published draft decree will soon finalise the implementation of the European Market Abuse Regulation (MAR) in the Netherlands. Although the MAR has had direct effect since July 2016 with significant implementing legislation in force since August 2016, several pieces of legislation still need to be amended as part of the implementation process. These include the Financial Markets Supervision Act and the Decree on Administrative Fines in the Financial Sector. The proposed amendments concern the turnover-related element of fines, maximum fines, and disclosure of enforcement actions.

Once this latest implementation phase is finalised, MAR supervision and enforcement will be fully in place. According to the Ministry of Finance, this will mean that the maximum fines set by the MAR can then be imposed. The Minister of Finance wants to complete the implementation as soon as possible, since the implementation deadline was 3 July 2016.

The MAR came into force on 3 July 2016 (see Financial Markets in brief) and the Dutch Implementation Act (Wet implementatie  verordening en richtlijn marktmisbruik) on 11 August 2016. With the entry into force of the new implementing decree, a large part of the Market Abuse Decree (Besluit marktmisbruik) will no longer apply. In addition, two member state options will be implemented. This means, for example, that:

  • the recorded reason for delays in disclosing inside information (including the date and time when inside information first existed; the time when the decision to delay disclosure of inside information was taken; who was responsible for the decision; and evidence of fulfilment of each of the conditions for delay) need only be provided to the Netherlands Authority for the Financial Markets (AFM) if so requested.
  • issuers and markets participants do not have to make transaction information public; it is sufficient for the AFM to include this information in its public register.

Turnover element of fines
Under the new MAR regime, the AFM and the Dutch Central Bank (DNB) can impose turnover-related fines. It is currently not possible to impose fines above the maximum amount in a specific fine category. By creating a new article (article 3a of the Decree on Administrative Fines), this maximum amount does not apply if a turnover-related maximum applies under article 1:82 of the Financial Markets Supervision Act. Regulatory authorities will probably formulate guidelines on how they will determine the amount of a fine under those circumstances; the draft decree provides a basis for this.

Maximum amount of fines
After the decree enters into force, the supervision and enforcement of the MAR will be fully implemented. According to the Ministry of Finance, this means that the maximum amount of fines issued by the MAR can then be imposed in the Netherlands for MAR violations.

Where European directives or regulations require, it will then also become possible to set a higher minimum and maximum fine by issuing an order in council. In addition, for violations of provisions which are punishable by the second or third fine category, a turnover-related fine maximum can be determined. Lastly, the maximum amount of fines in the third category will rise:

  • The maximum amount of fines for serious infringement will be raised from EUR 4 million to EUR 5 million and, as a result, the maximum fine for repeat infringements will be EUR 10 million.
  • For large enterprises, a fine of up to 10% of net annual turnover has been introduced. This maximum fine can be raised to EUR 20 million (for large enterprises) or, in specific cases, 15% of the net annual turnover. Before issuing this fine, the supervisor will first take all circumstances into account, including whether there is serious or reduced culpability, and what the offender’s financial capacity is. In the second category, a turnover-related fine maximum of 5% is introduced.
  • Where these amendments lead to higher fine maximums, they will only apply to violations committed after the decree enters into force.

Disclosure of enforcement actions
The draft decree implements two relevant changes to the disclosure of enforcement actions. First, decisions to impose third-category fines, and in some cases second-category fines, can be made public after they are issued, rather than after the fine becomes irrevocable. Second, the AFM and DNB will be able to issue a warning or statement when specific provisions are violated. The AFM can also do this in the case of infringements of the MAR.