by Prajakt Samant, Thomas Morgan and Simone Goligorsky
On September 28, 2012, the Agency for the Cooperation of Energy Regulators (ACER) issued the second of two pieces of non-binding guidance on the Regulation on Wholesale Energy Market Integrity and Transparency (REMIT). REMIT imposes requirements aimed at preventing and detecting market abuse, and more specifically, market manipulation and insider trading in the wholesale energy market.
The guidance considers, inter alia,:
- The scope of REMIT;
- The application of the definitions of wholesale energy products, wholesale energy market and market participants; inside information;and market manipulation; and
- The application of the obligation to publish inside information; the prohibitions of market abuse and on possible signals of suspected insider dealing and market manipulation; and the implementation of prohibitions of market abuse.
Considering the scope of REMIT, it should be noted that the guidance stipulates that intra-group transactions, i.e. over-the-counter contracts entered into by counterparties which are part of the same group of companies, would come within the scope of REMIT, given that the definition of wholesale energy products specifies that REMIT will apply to contracts irrespective of how and where they are traded.
Regarding penalties that will be imposed in the event that a market participant is found to be in breach of REMIT, the guidance states that the national regulatory authorities (NRAs), i.e. the bodies from each member state working with ACER to monitor market participants, should penalize not only breaches of the market abuse prohibition, but also:
- Any breaches of the obligation to notify ACER of any delayed disclosure of inside information;
- Any breach of the obligation to provide ACER with a record of wholesale energy market transactions; and
- A breach of the obligation to register with the competent NRA.
The first piece of guidance on REMIT was published by ACER in December 2011, a few days before REMIT entered into force. The guidance focused particularly on the definition of inside information, and what activities ACER would consider to be market manipulation, or attempted market manipulation. The guidance also gave examples of the types of activities that may indicate insider dealing and suspicious transactions.
It is expected that REMIT will be fully implemented by summer 2013. In the interim, member states will be required to enable NRAs with the means and powers necessary to investigate suspicious cases, and the prosecute confirmed cases of insider trading and market manipulation. By summer 2013, it is expected that both ACER and the NRAs (Ofgem in the UK) will start collecting data, and monitoring market participants that come within the scope of REMIT.