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On 23rd June 2022, the Malta Financial Services Authority (the “MFSA”) Published a circular addressed to issuers whose financial instruments are admitted to trading on a trading venue, or for which a request for admission to trading thereon has been made (“Issuers”). The circular is focussed on buy-back programs within the context of the EU’s Market Abuse Regulation (“MAR”), And summarizes Issuers’ obligations under MAR vis-à-vis buy-back programs and the conditions of the safe harbor exceptions which Issuers may avail themselves of, as per article 5 of MAR, from the applicability of obligations under MAR relating to the prohibition against market manipulation, insider dealing and unlawful disclosure of inside information within the context of share buy-back programs (the “Safe Harbor”).
The Safe Harbor provides a sense of legal certainty to issuers, seeing as article 5 of MAR sets out clearly defined requirements which equity buy-back programs (and stabilization measures) must meet. Accordingly, where the requirements set out in article 5 of MAR are met, Issuers are alleviated of the possibility of being accused of breaching the insider dealing or market manipulation provisions of MAR with respect to the program concerned; However, non-compliance with said requirements does not automatically imply a definite breach of the prohibitions either. In fact, in the case of non-compliance with the conditions of article 5 of MAR, for instance where the buy-back program concerns bonds and not equity securities, the MFSA’s circular clarifies that the program must be examined independently in accordance with the prohibitions. under MAR relating to insider dealing and market manipulation in order to ensure that no breach has taken place.
With this vein, it is important for Issuers to be aware of the conditions under MAR which apply in the context of buy-back programs (as well as those regulatory technical standards set out in Commission Delegated Regulation (EU) 2016/1052 (the “Delegated Regulation”)), So as to ensure that (i) the Safe Harbor benefits apply to a buy-back program implemented by the Issuer or (ii) even though the particular buy-back does not fall within the scope of article 5 of MAR, such as in the case of bond buy-backs, the program nonetheless meets the conditions outlined in article 5 of MAR to the extent possible, and therefore, has the effect of demonstrating that the prohibitions under MAR relating to insider dealing and market manipulation have not. been breached.
The key take-aways from the MFSA’s circular include (i) the MFSA’s expectation of Issuers to ensure compliance with the conditions and requirements in terms of MAR and the Delegated Regulation in order to benefit from the Safe Harbor, and this even in scenarios which fall out of scope of article 5 of MAR (although, only to the extent that this is possible in the particular scenario); (ii) the MFSA’s expectation of Issuers to respect the general transparency requirements of the MFSA even in situations where Issuers deviate from the requirements of the Safe Harbor and the Delegated Regulation; and (iii) the intention of the MFSA to engage with Issuers which are subject to the obligations contained in MAR, and the expectation of the MFSA in this respect that Issuers are able to explain and substantiate with information and documents, full and proper adherence with MAR in its entirety, prior, during and following the buy-back program.
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