Article Post on 27 March 2020

Episode 2 - COVID-19 Webcast - Legal & Regulatory Developments Coming from ESMA (Part 1 of 2)

_This is the second episode of our COVID-19 webcast series. Partner Mark Shaw wants to turn to the regulatory developments coming from European Securities and Markets Authority. As there is a lot of ground to cover, Mark Shaw will split this over two webcasts. In this episode he speaks on general COVID-19 response, short position disclosure and bans. 

Transcription of the video:

In the second part of this episode we will look at call recording under MiFID II, to the implementation of regulation and ESMA’s IFRS 9 guidance, plus any other developments that occur between now and then.

Today we’ll look at their general COVID-19 response, short position disclosure and bans.

On 11 March, ESMA released four recommendations to financial market participants in the immediate wake of the COVID-19 market turbulence: 

  • The first on Business Continuity Planning, reminding firms that they should invoke BCP in-line with regulatory obligations;
  • The second being that issuers should disclose relevant and significant information concerning the impacts of COVID-19 on their fundamentals, prospects or financial situation in accordance with their transparency obligations under the Market Abuse Regulation;
  • Issuers should also provide transparency on actual and potential impacts of COVID-19 on their financial position in their 2019 year-end financial report (if these have not yet been finalised) or otherwise in their interim financial reporting disclosures; and
  • Asset managers should continue to apply ESMA’s requirements on risk management and react accordingly.

Short Position Disclosure Limit dropped to 0.1%

On 16 March ESMA issued a decision temporarily lowering the reporting threshold for net short positions in shares traded on European Union regulated markets from 0.5% to 0.1% for a period of three months. Doesn’t apply to secondary listings where the principal trading venue is located in a third country, and there are other exemptions for market making activities and stabilisations under the Market Abuse Regulation.

ESMA followed this decision with a series of positive opinions on the temporary and limited short selling bans that have been put in place by the NCAs of certain EU member states:

  • The CONSOB in Italy - in place until up to 18 June;
  • The AMF in France - in place until up to 16 April;
  • The Belgian FSMA - in place until up to 17 April; and
  • The HCMC in Greece - in place until up to 24 April.

If you are in any doubt as to how to handle the legal issues arising out of the COVID-19 pandemic, please do use our helpline or visit our COVID-19 toolkit.

In the next episode we will look at the impact of COVID-19 on ESMA’s position on call recording under MiFID II, regulation implementation delays, ESMA’s IFRS 9 guidance and any other developments that may occur. 

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