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Obligation to notify market abuse

Market operators, investment firms and persons that professionally arrange or execute transactions in financial instruments are required to notify the AFM without delay of any reasonable suspicion of market abuse. The notification can be sent to stordesk@afm.nl.

What is market abuse?

Market abuse is unlawful behaviour and constitutes insider dealing, the unlawful disclosure of inside information and market manipulation.

Such behaviour constrains market transparency, which is a necessity for all market participants that are willing to trade in financial markets.

The AFM expects from those that are obliged to notify market abuse to evaluate per case whether there is a reasonable suspicion of market abuse. If this is the case, then a notification of market abuse should be done to the AFM without delay.

Sometimes transactions and orders turn out to be suspicious later in the light of subsequent events or information (for example new transactions and/or orders attributable to the same person, or the disclosing of inside information). In such cases, a STOR must be made to the AFM without further delay and the (legal) person responsible for submitting the STOR must be able to justify the delay.

Who is obliged to report suspicion of market abuse?

The regulation requires that market operators (such as Euronext) and investment firms that operate a trading venue shall establish and maintain effective arrangements systems and procedures aimed at preventing and detecting insider dealing and market manipulation (i.e. market abuse), as well as attempts to engage in such activities. The Regulation also requires market operators and investment firms to notify the AFM - about orders and transactions, as well as cancellations or modifications that could constitute (attempted) market abuse. In such cases, the notification that must be made is referred to as a Suspicious Transaction and Order Report (STOR).

In addition, every person that professionally arranges or executes transactions in financial instruments must establish and maintain effective rules, systems and procedures to detect and notify suspicious orders and transactions. If such a person has a reasonable suspicion that an order and/or transaction in a financial instrument, whether placed or executed on or outside a trading platform, could constitute insider dealing, market manipulation or attempted insider dealing or market manipulation, the person is obliged to notify the AFM without delay.

If a reasonable suspicion exists that an order or transaction represents actual or attempted insider dealing or market manipulation, the order or transaction concerned will be notified to the AFM by the persons who professionally arrange or execute transactions and who are registered in the Netherlands, or whose head office or branch office is in the Netherlands.

If the suspicion of market abuse arises from an order and/or transaction executed through a Dutch company's branch office in another EU Member State, the company will report the suspicion to the competent authority of the Member State in which the branch office is located.

How can you report a suspicion of market abuse?

ESMA has developed a template that must be used for submitting a STOR. This template can be downloaded from the AFM's website. Once completed, the STOR should be emailed to STORdesk@afm.nl, preferably protected (with a password).

Your notification will always be treated confidential. After submitting a STOR to the AFM, you will receive a confirmation of receipt from the STOR desk. It is possible that the AFM will contact you in order to verify the submitted information. A notification of market abuse could result in an investigation by the AFM.

What should be reported in a STOR?

A STOR has to be clearly presented and must contain accurate information that is sufficient for the AFM to evaluate the suspicion quickly and if necessary set up an investigation.

The AFM would also like to receive all other relevant information, such as written reports, if any, and/or recordings of conversations between the customer and the organisation relating to the suspicious orders and/or transactions. Such information is valuable for an investigation the AFM might conduct. The notification should also be accompanied by relevant press releases, information in the public domain, and/or portfolio details.

Duty of confidentiality of the AFM

The AFM is under an obligation of confidentiality that is laid down in the FSA. The FSA stipulates that all confidential data and information that the AFM receives in relation to its supervision, remains confidential. Hence, the AFM treats every STOR as strictly confidential. However, there are a few exceptions to the obligation of confidentiality. These exceptions allow the confidential information on which the investigation is based on, such as a notification about a suspicious order and/or transaction, to be shared with other government bodies. In some cases, this sharing is even mandatory. When and which information must or can be shared by the AFM with, for example, De Nederlandsche Bank (the Dutch central bank) or the Public Prosecution Service, is laid down in covenants based on the FSA.

Supervision of notification of market abuse

The AFM may take measures if one has failed to meet the obligations regarding the notification of market abuse to the AFM. The AFM determines which measure is appropriate in each individual case.

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