Regulatory Oversight in Financial Markets - Transparency Obligations and Prohibitory Norms in the European Union

Josef Bergt
2023

Introduction

The financial markets, a cornerstone of modern economies, are governed by a complex web of regulations designed to ensure transparency, fairness, and stability. Publicly traded companies and market participants are mandated to adhere to various transparency and prohibition rules, including but not limited to, the prevention of insider trading and market manipulation. This article aims to provide an overview of the regulatory framework governing financial markets, with a focus on the European Union's Market Abuse Regulation (MAR), as well as the roles of supervisory authorities in maintaining market integrity.

Transparency Obligations and Prohibitory Norms

Publicly traded companies are obligated to fulfill a multitude of transparency requirements. These include the issuance of ad-hoc announcements, the regular publication of financial reports, and the reporting of Directors' dealings and voting rights notifications by market participants. The overarching objective is to ensure that market participants have access to timely and accurate information, thereby fostering an environment conducive to fair trading.

Market Abuse Regulation (MAR)

The MAR serves as the cornerstone of the European Union's efforts to combat market abuse and ensure transparency. It outlines a range of duties and prohibitions aimed at preventing insider trading and market manipulation. The MAR is supplemented at the European level by various implementing regulations and may be further complemented at the national level of EU or EEA Member States.

Regulatory Authorities and Oversight

Competent national supervisory authorities are responsible for ensuring that companies and market participants comply with the obligations and prohibitions outlined in the MAR. They operate in conjunction with other European supervisory authorities and are instrumental in the enforcement of financial market regulations.

Stock Exchange Supervisory Authorities

Competent National supervisory authorities not only oversee publicly traded companies but in general also supervise individual stock exchanges unless separate Stock Exchange Supervisory Authorities are established on a national level. The competent authorities ensure that trading on the exchanges is conducted in accordance with applicable stock exchange regulations.

International Cooperation

Competent national supervisory authorities collaborate with relevant foreign agencies and the European Securities and Markets Authority (ESMA), thereby extending their regulatory reach beyond national borders.

Conclusion

The regulatory framework governing financial markets in the European Union is both intricate and dynamic, necessitating continuous adaptation to evolving market conditions. Various European Directives and Regulations like the MAR, along with national implementations and the supervisory roles of competent national supervisory authorities, collectively contribute to the maintenance of market integrity.

Source: BaFin on Stock Exchanges & Markets

Executive Summary:

• The MAR serves as the primary regulatory framework at the EU level, countering market abuse with regard to financial markets and stock exchanges and its actors.
• In general, competent national supervisory authorities are responsible for ensuring compliance with the MAR and overseeing individual stock exchanges, unless special supervisory bodies are established.
• Transparency requirements and prohibitory norms are essential for maintaining market integrity.
• International cooperation among regulatory authorities is crucial for effective oversight.