Advocate General opinion on neutral order execution and insider dealing under MAR
The case concerns a fine imposed by the Bank of Lithuania on an investment firm for alleged insider dealing under Article 14(a) MAR. The firm acted in a dual capacity as lead arranger for the ABB carried out on behalf of its client and as an execution broker executing the client's sell orders on the regulated market under a separate investment services agreement. In its role as lead arranger, the firm became aware of the fixed ABB price of EUR 4, which the authority treated as inside information within the meaning of Article 7 MAR. Before that price was publicly disclosed, the firm executed the client's sell orders on the regulated market at a price higher than EUR 4 in accordance with the client's instructions and for a standard commission. The authority characterised this as "use" of inside information for the client's benefit, even though the firm did not trade for its own account, thereby raising the core question of how MAR applies to neutral order execution.
The ABB itself was conducted under unusual circumstances, as it took place over two days and in parallel with trading on the regulated market, and the share price was fixed in advance by the seller, rather than determined through the bookbuilding process. This structure created a risk of speculative trading and potential detriment to investors active on the regulated market that is not normally associated with an ABB.
In the Opinion, the AG concludes that Article 9(2)(b) MAR must be interpreted as meaning that an investment firm which executes orders to sell securities on the regulated market on behalf of a client, including in parallel with an accelerated bookbuilding, does not engage in insider dealing merely by doing so. Where execution is carried out legitimately in the normal course of the firm's duties and in compliance with the applicable professional standards, the firm cannot be presumed to have infringed Article 14(a) MAR, even if it is in possession of inside information. Liability may, however, arise if the competent authority establishes, within the meaning of Article 9(6) MAR, that there was an illegitimate reason for the execution. It is not necessary for the investment firm to demonstrate that the client did not use inside information when placing the order.
The question of execution of customer orders in situations involving potential insider dealing has also been addressed by the DFSA's, which has issued guidance on execution of customer orders and reporting under MAR (VEJ nr 9792 of 15 August 2025). According to the guidance, execution of a customer order in such circumstances may give rise to questions of accomplice liability, even where the firm's role is limited to order execution, and firms and employees are therefore advised to refrain from executing such orders.
The AG's Opinion provides further guidance on the interpretation of MAR, and it will be of interest to see how the Court of Justice addresses the issues raised and how this may inform the application of the Danish guidance going forward.
For more capital markets law updates, see Plesner's LinkedIn-page: Plesner Capital Markets Update