Market abuse was introduced as a result of the FSMA 2000, s118. The aim of this new directive is to establish open, transparent and fair markets for trading by eliminating abusive practices.
Market abuse has two main elements : there must be a breach of one or more of the three statutory conditions plus one or more of the behaviour requirements.
The FSMA 2000, s118(2) defines behaviour based on the misuse of such information as: ‘behaviour based on information which is not generally available to those using the market but which, if available to a regular user of the market, would or would be likely to be regarded by him as relevant when deciding the terms on which transactions in investments of the kind in question should be effected.’
Types of behaviour that come within the scope of market abuse are:
- dealing in qualifying investments
- dealing in commodities or investments that are the subject matter of (or where price is determined by reference to) a qualifying investment
- acting as an arranger in respect of qualifying investments
- causing, procuring or advising others to deal
- disseminating statements or information that are reasonably likely to be regarded as relevant in determining the terms on which transactions in qualifying investments should be entered into
- corporate finance advice; and
- managing qualifying investments.
Since the introduction of the Market Abuse regime in 2001 the FSA has taken enforcement action against firms as well as individuals. Not only can the resulting FSA financial penalty act as a punishment for any conduct in breach of the law but organisations that are caught up in allegations of abusive conduct can be exposed to major reputation damage as well as the possibility of additional costs to cover the expense of corrective work to ensure that its staff are properly trained and its systems and controls adequate to manage against any future abusive conduct.
A central pillar of the FSA’s market abuse regime is the obligation placed on securities organisations to monitor for potentially abusive transactions and report any such transaction to the FSA. This obligation places a burden on organisations to ensure that their surveillance systems, controls and resource are both effective and robust enough to ensure that suspicious activities are identified and reported in a timely manner.
How we can help
- Provide induction, ongoing or remedial training and coaching to your staff on the latest market abuse rules and how they impact on doing business,
- Review your current market abuse systems and controls and advise on how they might be strengthened,
- Review your current arrangements for market abuse surveillance, monitoring and reporting.
|
