CopiedEU SME Growth Markets Alleviations are Limited

MiFID II created a new trading venue category, SME Growth Markets (SMEGMs), to facilitate SME financing. Only MTFs where at least 50% of issuers are “SMEs” (i.e., companies with an average market cap of max €200Mn) can obtain the SMEGM status.

MAR currently provides only two minor alleviations for SMEGM issuers:

1. Allowing issuers to post inside information on the trading venue’s website, instead of the issuer’s website.
2. Allowing the establishment of insider lists first when requested by the NCA (National Competent Authority).

These alleviations have proven to have very limited effect.

New MAR Alleviations for SMEGMs Copied

The European Parliament and European Council adopted limited SMEGM alleviation rules related to MAR in October 2019. These rules were signed in Strasbourg on 25 November 2019 and published in the EU Official Journal. The aim is to reduce the administrative burden for SMEs and improve liquidity while preserving core investor protection and market integrity principles.

The new MAR alleviations for SMEGMs related to inside information are principally the following:

• When an issuer delays the disclosure of inside information, MAR stipulates that the issuer shall inform the NCA of the delay and provide a written justification immediately after public disclosure. The new SMEGM alleviation imposes that such justification only needs to be provided upon the NCA’s request. As long as the issuer can justify its delay, the issuer must not keep a record of that justification. However, the obligation to notify any relevant delays to the NCA remains.
• The current “prompt” time frame for issuers to disclose certain information related to transactions notified by PDMRs (Persons Discharging Managerial Responsibilities) and PCAs (Persons Closely Associated) is somewhat relaxed. Issuers will now be allowed to disclose such transactions within 2 business days of receiving notification of those transactions by the PDMRs or PCAs.
• Issuers whose financial instruments are admitted to trading on an SME growth market shall be entitled to include in their insider lists only those persons who, due to the nature of their function or position within the issuer, have regular access to inside information. These include directors, members of management bodies, or in-house counsel.

Differences Between the New and Existing Categories Copied

The new revised category under SMEGM rules differs from the previous European Parliamentary Research Service description in its April 2019 Brief, which indicated that SMEGM issuers would only maintain a list of permanent insiders, including persons and their direct families with regular access to inside information.

The new revised category also differs from the Commission Implementing Regulation (EU) 2016/347, which defines the permanent insiders section as persons with access to all inside information within the issuer due to their function or position.

The new SMEGM rules allow an SMEGM issuer to keep a single insider list based on the person’s position within the company, not whether they are an insider for a specific project or a permanent insider.

ESMA will develop a draft implementing technical standards during 2020 for the precise format of these insider lists.

Additional Requirements Copied

• Member States can still require SMEGM issuers to provide more extensive insider lists that include all persons with access to inside information. Whether the member state allows a light SMEGM insider list or follows the regular insider list, the list must be promptly provided to the NCA upon request.
• SMEGM insider list alleviations will not apply to obligations of persons acting on behalf or for the account of the issuer (e.g., accountants, lawyers, rating agencies). The current obligations for maintaining subsidiary lists remain.

SMEGMs with Status as of November 2019 Copied

Certain EU MTFs obtained SMEGM status by early November 2019, including:

• SME Growth Market BEAM (BSE, Bulgaria).

• Euronext Growth (Euronext’s pan-European MTF in France, Ireland, Belgium, and Portugal).

• Nasdaq First North Growth Market (constituting the equity segments of Nasdaq First North in Sweden, Finland, and Denmark).

• NEX Exchange Growth Market (UK).

• AIM (LSE, UK).

• AIM Italia (LSE, Italy).

• NewConnect (WSE, Poland).

• Progress Market (ZSE, Croatia/Slovenia).

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