Since it came into effect in July 2016, the European Market Abuse Regulation (MAR) revised the framework for preventing abuse, increasing market integrity, and improving protection for investors. But what has the MAR set into motion for 2018, you may ask? On 24th May this year, the European Commission (EC) published their proposed amendments to the MAR, in addition to the new Prospectus Regulation. The proposal was intended to promote the use of SME Growth Markets. In a reaction to these regulations, issuers discovered the benefits of circumventing the MAR restrictions with the help of The International Stock Exchange (TISE).
A Change of Perspective
Ahead of these regulatory revelations, Jeroen Fijneman, NN Investment Partners’ Head of Compliance for Belgium & Senior Compliance Officer, shared with us how he felt the complexities of the European Market Abuse Regulation (MAR) would ultimately affect portfolio managers. “We have an open and direct relationship with the Central Trading Desk, senior management of the Front Office, and a lot of the individual portfolio managers with whom we actively discuss changes of regulations and the practical impact to our business,” Fijneman explains. “In this way, we try to make sure that besides complying with the regulations, our policies and procedures connect to the daily practice and our employees understand why certain choices are/need to be made.”
The smooth assimilation of regulatory changes was further amplified by Fijneman’s point-of-view on the changes to both buy-side and sell-side strategies. “Especially on MAR and specifically around Market Soundings, you see much more attention on sharing potential inside information on the sell-side than in the past, which also makes lives for the buy-side compliance clearer and therefore easier.” The SCO also commented on how the regulatory landscape would continue to develop in the next few years: “You’ll slowly see a decrease in the speed of new legislation, but it will still take time to find a new balance. Of course, the ideas behind a lot of the regulations were solid and understandable, but hopefully new future legislation will deal more with aligning the different, recently implemented regulations.”
A New Balance with TISE Alignment
Following on from Jeroen Fijneman words, finding a new balance and a different alignment can be seen in the growing interest of The International Stock Exchange (TISE). Issuers have been listing their High-Yield Bonds (HYBs) on TISE in the Channel Islands since August 2016 – but the numbers have been growing to date.
Why the Channel Islands, you ask? Because listing products on non-EU markets is appealing more and more to issuers in the wake of the European Market Abuse Regulation (MAR). As TISE is one such non-EU market, it’s ideal to operate in the Channel Islands because it’s in the European time zone, without specifically being part of the EU. This means the MAR does not apply to the securities which are listed on the TISE Exchange. Therefore, it’s no wonder there are more than 2000 specialist debt securities listed on TISE. As well as this, 103 companies have listed 156 HYBs between July 2016 and June 2018.
According to the TISE Group: “MAR contrasts with our rules which are robust yet applied proportionately according to the types of listed products…” TISE’s practices as a sanctioned stock exchange are further enhanced because it is recognised by HMRC. This is specifically due to section 1005 of the United Kingdom Income Tax Act (2007). Another point worth noting is when HYBs are listed on TISE, the interest paid on these qualified bonds does not have to be withheld for UK tax purposes.
So, what will the next countermove to the MAR be? Check back here for the next industry update.
Source: Mondaq. This article was originally published on Mondaq.com