John I. Sanders and associate Morgan Maguire, along with Bas van Rooijen of Cleber N.V., co-authored the article titled, “EU Listing Act Introduces Exemptions Allowing Insiders to Trade During Blackout Periods”
Moore & Van Allen Head of International Capital Markets John I. Sanders and associate Morgan Maguire, along with Bas van Rooijen of Cleber N.V., co-authored the article titled, “EU Listing Act Introduces Exemptions Allowing Insiders to Trade During Blackout Periods.”
On November 14, 2024, the EU Listing Act (the “Listing Act”) was published in the Official Journal of the European Union. The Listing Act entails a legislative package designed to improve capital markets access and enhance the overall appeal of EU capital markets, including new exemptions under the Market Abuse Regulation (“MAR”) that allow persons discharging managerial responsibilities (“PDMRs”) to trade company securities during financial report blackout periods.
Previously, PDMRs were generally prohibited from trading any company shares in the 30-day period prior to the publication of the company’s annual and mandatory interim financial reports (i.e., the blackout period) and exemptions were limited to exceptional circumstances (e.g., severe financial hardship experienced by the PDMR), employee stock programs, and transactions in which the beneficial interest in the shares did not change. Even under these circumstances, the PDMR needed the permission of the company to trade.
The exemptions introduced by the Listing Act, which are not subject to company approval, allow PDMRs to trade during the blackout period when the trade (i) does not relate to an active investment decision by the PDMR (e.g., pursuant to orders from an investment adviser with discretionary trading authority), (ii) results exclusively from external factors or actions of third parties (e.g., an inheritance, gift, or discretionary asset management arrangements), or (iii) is based on predetermined terms, such as irrevocable arrangements entered into outside of or prior to a blackout period. In addition, the exemptions will be applicable to trades of all financial instruments issued by the company rather than limited to trades of shares. Together, the amendments reflect the view that prohibitions against insider trading should be clear, consistent, and limited to willful actions and activities of insiders.
In addition, the notification threshold for the PDMRs will be raised from €5,000 to a minimum of €10,000 and a maximum of €50,000 per calendar year, depending on local implementation of the Listing Act across EU member states.
As a result of the Listing Act, listed companies may need to revise their insider trading policies and internal compliance manuals to reflect the new exemptions. Companies may still voluntarily impose stricter trading restrictions, of course, including pre-clearance procedures, internal blackout extensions, or additional cooling-off periods for discretionary trades.
While many reforms introduced through the Listing Act increased the competitiveness of EU capital markets by merely aligning EU laws and regulations to those of other international markets, the amendments to MAR are noteworthy as they open up paths for insiders to trade as other markets, notably the U.S., have recently moved to limit them.[i] Alone, the exemptions are unlikely to sway a company’s decision of whether to list shares in the EU or the U.S., but they are certain to be factor in the decision, particularly for companies in which insiders will have substantial holdings after listing.
This article is a summary prepared for the general information of interested persons. It is not, and does not attempt to be, comprehensive in nature. Due to the general nature of its content, it should not be regarded as legal advice with respect to the laws the United States, the Netherlands or any other jurisdiction.
For information about the participation of U.S. persons in the international capital markets, the use of U.S. law to facilitate securities offerings by international companies, or U.S. corporate law more generally, contact the U.S. qualified team at Moore & Van Allen PLLC.
For further information about the Listing Act, MAR, and European corporate law more generally, contact Maarten Drop or Bas van Rooijen at Cleber N.V. in Amsterdam, The Netherlands.
[i] SEC Adopts Amendments to Modernize Rule 1-b5-1 Insider Trading Plans and Related Disclosures, SEC, (December 14, 2022), https://www.sec.gov/newsroom/press-releases/2022-222.