1. Legal Framework: Regulation (EU) no. 596/2014
On 3 July 2016, the Regulation (EU) no. 596/2014 of the European Parliament and Council of 16 April 2014 entered into force, which altered the market abuse regime provided on the Securities Code (CVM).
As it is a community regulation, the legal regime thereby expressed does not need to be subject to a transposition to the legal order of several member-states. Therefore, from 3 July, the financial intermediaries, issues of securities admitted for negotiation on a regulated market and also the market managing entities, within the multilateral business systems, are not bound, on the exercise of their activities, to this Regulation’s content.
The new market abuse legal framework, given the previous legal framework, introduces significant alterations which are listed below:
Extension of the scope of application of the market abuse regime in the face of the regime previously provided on the CVM. Accordingly to article 2 of Regulation (EU) no. 596/2014, the market abuse regime is now equally applicable to financial instruments admitted for negation on a regulated market or which admission has been requested, to financial instruments transferred on multilateral business systems, to the defined benchmarks and also to the conducts or transfers in which are included auction sales carried out through a platform licensed as authorized market of issuance permits, as well as other auctioned goods thereby based.
Abuse of privileged information. Within this scope, the Regulation which approves the market abuse regime alterations also envisages, on article 8, that the situations in which a person holds privileged information and uses it as support to purchase or alienate, on their behalf or on behalf of a third party, direct or indirectly, financial instruments thereby regarded or when this information originates a cancellation or alteration of an order with a financial instrument regarded as subject, assuming that an order has been filed before the person came to hold the privileged information, they are deemed as abuse of privileged information cases.
Market manipulation. From article 12 of the Regulation (EU) no. 596/2014 results a set of activities inserted on the concept of market manipulation. Therefore, some objectivity was granted to the general character expressed on the definition of market manipulation conducts which, previously, was in force within the CVM.
As an example, it is now deemed as market manipulation conduct the purchase and sale of financial instruments at the moment of market’s opening or closing, whenever this conduct concretely or potentially aims to mislead investors which act based on the prices presented, including the opening and closing prices.
2. Market rules of conduct
The regulation of financial markets and market conduct rules aim to ensure the trust and integrity on the activities developed on a market context, a fact that shall promote the existence of integrated, efficient and transparent markets.
The regulatory activity of the financial markets and the derived legal rules are applied to all stakeholders. This shows the great importance of our customers being aware of the legal standards currently in force on this domain.
It shall be emphasized that the liability for the compliance with the specific rules which is directly applicable within this scope belongs exclusively to the individual market participant, namely, to each of our customers.
Given the previously mentioned reasons, we deem essential that the DIF Broker customers are clearly and surely aware of the legal rules specifically concerning market abuse and regarding the conducts recommended within the negotiation on financial markets.
In order to do so, you shall find below a not exhaustive list which describes situations that must be avoided as they constitute breaches of market rules.
The following examples constitute breaching actions of the market conduct rules:
Benefit from non-disclosed information regarding a company and which are liable to influence the prices, aiming to obtain profit and avoid losses by buying or selling shares and/or related financial instruments;
Disclose false or misleading information, rumors or any kind of messages that may influence the price of a security, aiming to exploit the derived price movement;
Disclose false or misleading information about circumstances crucial to the evaluation of a security;
Disclose privileged information;
Purchase and sale, simultaneously, the same securities on behalf of the sole beneficiary, in order to favor the existence of false or misleading indications demanding the demand and supply of the securities or concerning their market price;
Provoke liquidity or prices distortions through the insertion of equal purchase and sale orders, on an opposite direction, on the same security, through a previous mutual agreement between two or more parties;
Purchase or sale securities moments before the closing of the stock market, aiming to influence the closing prices (set the closing price).