1. MAR and MAD II Ilona Schembri Analyst Securities and Markets Supervision Unit 12 th April 2016

2. Scope To provide an overview of the changes brought about by MAR: PDMRs List of Insiders Administrative Penalties To provide an overview of the changes brought about by MAD II: Criminal Penalties 2

3. PDMRs – Article 19 of the Regulation Amended to ensure greater transparency Applies to trading venues (RM, MTF and OTF) Issuers and emission allowance market participants inform the PDMRs in writing of their obligations Cannot trade during the closed period (30 calendar days before the announcement of an interim financial report or a year-end report) Exceptions in 2 circumstances only (new)

4. Notifications:  Shares, debt instruments or derivatives and other linked financial instruments  Emission allowances, auction products and related derivatives Other notifications include:  Pledging or lending  Transactions undertaken  Transactions made under a life insurance policy Threshold of €5,000 (without netting the transactions) Sent to the Authority within 3 business days from date of transaction

5. Technical Standards provide for the format and template used Electronically sent

6. Insider List – Article 18 of the Regulation This list shall be drawn up by an issuer or any person acting on their behalf Any person who has access to inside information and any person working for them shall be included Any listed person shall acknowledge in writing of being aware of his duties Insider list shall include – 1) identity of the person, 2) reason, 3) date and time when access to inside information was obtained (new), 4) date when the list was drawn up (as arising under Level 1 text)

7. List shall be updated promptly when:  There is a change in reason  New person has access to inside information  Person ceases to have access to inside information Each update shall specify the date and time List shall be retained by issuers or any person acting on their behalf for 5 years This duty shall also apply to:  Emission allowance participants  Any auction platform, auctioneer and auction monitor

8. Technical Standards on the precise format of the insider list Justifications for the fields included are:  Name and Surname – to ascertain the identity of the person  Telephone numbers (personal/professional) – to establish contact  Company name and address – to establish where the person works  Function and reason for being an insider – to understand the level of information accessed by a person  Date obtained/ceased to access inside information – to determine the timeframe  Date of birth – to be certain of the identity of a person  National identification number – to be assured of the identity of a person  Personal address – understand possible geographical links Submitted in the official language of the competent Authority (in our case, English language)

9. Benefits  Common approach facilitates the implementation of MAR  Protects the integrity of the market and detects possible insider dealing – leads to more public confidence Two lists introduced:  Insider List – Annex 1 Template 1 – Deal-specific/Event based sections - includes all those insiders in respect of that information, even the coming into existence of inside information  Permanent Insiders Section of the Insider List – Annex 2 Template 2 – relates to insiders considered as insiders in respect of all types of inside information example due to their function or position – need not be reported on the other list Annex 1 sent to the Authority but if Annex 2 is also filled in, it shall also be sent to the Authority

11. ProvisionsPFMA Order requiring the cessation of the conduct and the desist from a repetition of that conduct Article 17 (2) (a) Disgorgement of profits gained or losses avoidedFreezing of funds (criminal sanction) Public warning indicating the person responsible for the infringement and the nature of the infringement Article 17 (3) Withdrawal or suspension of the authorisation of an investment firm Article 17 (3) Temporary or permanent bans of persons exercising management functions in investment firms Article 17 (3) Temporary bans of any natural person dealing on own account Article 17 (3) Administrative pecuniary sanctions of at least three times the amount of the profits gained or losses Article 17 (3) 11 Administrative Sanctions – Article 30 of the Regulation

12. PFMAMAR No distinction between natural and legal persons. Fine up to €150,000 for each infringement or failure to comply Natural and Legal Persons: (i)infringements of market abuse: Natural Persons – maximum of at least of €5,000,000 Legal Persons – maximum of at least of €15,000,000 or 15 % of the total annual turnover of the legal person (ii) infringements not having an effective arrangement, system and procedure to prevent and detect market abuse and public disclosure of inside information: Natural persons - maximum of at least of €1,000,000 Legal persons - maximum of at least of €2,500,000 or 2 % of its total annual turnover (iii) infringements of insider list, managers’ transactions and investment recommendations and statistics: Natural persons – maximum of at least of €500,000 Legal persons – maximum of at least of €1,000,000 12 Administrative Penalties

13. Transposition of MAD II 13 MAD II needs to be transposed, as opposed to MAR, except for certain articles. A directive felt necessary with respect to criminal sanctions for two reasons: 1. Some Member States do not provide for any criminal sanctions with respect to market abuse, as to date. 2. The European Commission emphasizes that ‘Criminal sanctions demonstrate social disapproval of a qualitatively different nature compared to administrative sanctions or compensation mechanisms under civil law.’

14. Criminal Sanctions PFMAMAD II No distinction between natural and legal persons. Fine (multa) of at least €2,500 and up to €940,000 or up to three times the profit made or the loss avoided, whichever is the greater, or imprisonment up to seven years or to both such fine and imprisonment Natural Persons: 1.Offences of insider dealing and market manipulation - imprisonment of minimum four years 2. Offence of unlawful disclosure of inside information - imprisonment of minimum two years 3. Offences of inciting, aiding and abetting, and attempt – Member State will decide Legal Persons: Any criminal or non-criminal sanction, e.g. temporary or permanent disqualification from the practice of commercial activities 14

15. 1. The same definitions and the same concept of market abuse are retained under MAD II 2. Both legal persons and natural persons are included 15 Differences between MAR and MAD II: Similarities 1. MAR lays down ‘knows, or ought to know’; therefore, on a basis of probability; MAD lays down ‘intentionally’; therefore beyond reasonable doubt. 2. Administrative sanctions imposed by the MFSA; Criminal sanctions imposed by the Criminal Court. Differences

16. The Way Forward Bill in process Meetings with any relevant persons Answering calls and emails with respect to queries that may arise 16

17. 17 Contact Email: ischembri@mfsa.com.mt

18. Thank you!