Stefano Lombardo

Federico M. Mucciarelli

Free University of Bozen/Bolzano, CRELE and ECGI

University of Modena and SOAS

Market soundings : the interaction between securities regulation and company law in the United Kingdom and Italy

01/04/2020

Before deciding on operations involving share issuance or sale, companies or shareholders may seek to disclose information to selected investors, in order to gauge their opinion on the envisaged market operation. Such ‘market soundings’ risk violating the prohibition of insider trading and yet such selective disclosures have been partially accepted in several European jurisdictions. Market soundings have been recently regulated in the Market Abuse Regulation, which clarifies under which circumstances they are allowed and the position of the involved parties. This Article analyses the rules on market soundings in the Market Abuse Regulation with regard to initial public offers of securities, issuance in the secondary market and accelerated bookbuildings. Additionally, it will be stressed that market soundings might also violate national company law rules and principles, mostly those related to directors’ duties and liabilities. This Article addresses how Italian and English company law regimes react towards selective disclosures. It will be shown that a tension may still exist between national company law rules and uniform rules on the prohibition of market abuses.

I. INTRODUCTION

Regulation (EU) No 596/2014, the Market Abuse Regulation (hereinafter MAR), and Directive 2014/57/EU (hereinafter CRIM-MAD), which entered into force on July 3 2016, have replaced the Market Abuse Directive (hereinafter MAD), regulating insider trading and market manipulations in the European Union.6 While MAR is one of the EU measures aimed at harmonizing national rules that ‘have as their object the establishment and functioning of the internal market’ and provides substantive rules on insider trading and market manipulation, CRIM-MAD is a directive aimed at ensuring ‘the effective implementation of a Union policy in an area which has been subject to harmonisation measures’8 and only focuses on criminal sanctions for market abuse. These two acts are complemented by subordinate legislations, such as Regulatory Technical Standards (RTS), Implementing Technical Standards (ITS)12, proposed by ESMA13 and enacted by the Commission, and ESMA guidelines and recommendations.

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