Market Abuse

Walker, George; Purves, Robert

doi:10.1093/law/9780199685592.003.0009

Financial Services Law (3rd Edition)

George Walker (ed.) et al.

https://doi.org/10.1093/law/9780199685592.001.0001

Published:

20 March 2014

Online ISBN:

9780191811913

Print ISBN:

9780199685592

- Copyright Page
  - Notes
  - Notes
- Table of Cases
  - Notes
  - Notes
- Table of UK Legislation
  - Notes
  - Notes
- Table of European Legislation
  - Notes
  - Notes
- Table of UK Secondary Legislation
  - Notes
  - Notes
- Table of Treaties and Conventions
  - Notes
  - Notes
- List of Abbreviations
  - Notes
  - Notes
- Editors and Contributors
  - Notes
  - Notes
- Introduction
  - Notes
  - Notes
- Notes
- 5 The PRA and FCA and the Handbooks of Rules and Guidance
  - Notes
  - Notes
- 6 Regulatory Processes—Authorisation, Supervision, and Enforcement
  - Notes
  - Notes
- 7 Financial Redress—Complaints, Disputes, and Compensation
  - Notes
  - Notes
- 8 Listing and Public Offers
  - Notes
  - Notes
- - Background to the Introduction of the Market Abuse Regime Background to the Introduction of the Market Abuse Regime
    - Introduction Introduction
    - Market abuse provisions in FSMA intended to fill a legislative ‘gap’ Market abuse provisions in FSMA intended to fill a legislative ‘gap’
    - The failure of legislation adequately to protect against market misconduct The failure of legislation adequately to protect against market misconduct
    - The failure of high-profile prosecutions to bring to justice those suspected of market misconduct offences The failure of high-profile prosecutions to bring to justice those suspected of market misconduct offences
      - The Blue Arrow case and the failure of the ‘conspiracy to defraud’ offence to catch market misconduct The Blue Arrow case and the failure of the ‘conspiracy to defraud’ offence to catch market misconduct
      - Criticisms of the failure of the prosecution in the Blue Arrow case Criticisms of the failure of the prosecution in the Blue Arrow case
      - The Saunders saga and the involvement of human rights to frustrate successful prosecutions for market misconduct The Saunders saga and the involvement of human rights to frustrate successful prosecutions for market misconduct
    - The Market Abuse Directive The Market Abuse Directive
    - Access to and fairness of information Access to and fairness of information
  - The Nature of the Market Abuse Regime and Underlying Processes The Nature of the Market Abuse Regime and Underlying Processes
    - Introduction Introduction
    - The nature of the offences—European Court of Human Rights The nature of the offences—European Court of Human Rights
    - The significance of the distinction between criminal and civil offences The significance of the distinction between criminal and civil offences
    - Burden of proof and the standard of proof applicable to the market abuse offence Burden of proof and the standard of proof applicable to the market abuse offence
      - Burden of proof Burden of proof
      - Standard of proof Standard of proof
      - Application of the balance of probabilities test Application of the balance of probabilities test
      - How the test has been applied in practice How the test has been applied in practice
      - Spector Photo: rebuttable presumption Spector Photo: rebuttable presumption
    - The privilege against self-incrimination as it relates to the market abuse offence The privilege against self-incrimination as it relates to the market abuse offence
    - European Convention on Human Rights—obligations on public authorities European Convention on Human Rights—obligations on public authorities
      - The FCA’s obligation to act compatibly with the ECHR, which underlies the market abuse offence The FCA’s obligation to act compatibly with the ECHR, which underlies the market abuse offence
      - Fair process Fair process
      - Unreasonable behaviour and costs Unreasonable behaviour and costs
  - The Market Abuse Offences The Market Abuse Offences
    - Market abuse in Part VIII FSMA and the impact of MAD on the market abuse regime Market abuse in Part VIII FSMA and the impact of MAD on the market abuse regime
    - The ‘regular user’ test at the heart of the pre-MAD market abuse regime The ‘regular user’ test at the heart of the pre-MAD market abuse regime
    - The FSMA market abuse regime following the implementation of the provisions of MAD The FSMA market abuse regime following the implementation of the provisions of MAD
    - Sunset clause for the legacy offences Sunset clause for the legacy offences
    - The Code of Market Conduct The Code of Market Conduct
    - Other source material Other source material
      - ‘Precedent Value’ ‘Precedent Value’
    - Scope of the definition of market abuse in section 118 Scope of the definition of market abuse in section 118
    - The ‘qualifying investments’ element The ‘qualifying investments’ element
    - Territorial scope—where behaviour takes place Territorial scope—where behaviour takes place
    - Vicarious liability Vicarious liability
    - The mental element The mental element
    - Spector Photo Spector Photo
    - The statutory defence The statutory defence
    - The types of behaviour constituting market abuse The types of behaviour constituting market abuse
    - Behaviour relating to the use of information Behaviour relating to the use of information
    - Behaviour relating to false or misleading impressions Behaviour relating to false or misleading impressions
    - Requiring and encouraging Requiring and encouraging
    - Auctions of EU Emissions Allowances Auctions of EU Emissions Allowances
  - Market Abuse Offences that Concern the Use of Information—Definitions Market Abuse Offences that Concern the Use of Information—Definitions
    - Insider Insider
    - ‘Inside information’ ‘Inside information’
      - Pending orders Pending orders
      - FSA guidance and evidential provisions as to information that is not ‘inside information’ on the basis of whether information is ‘generally available’ FSA guidance and evidential provisions as to information that is not ‘inside information’ on the basis of whether information is ‘generally available’
      - Rumours Rumours
      - Precise Information Precise Information
      - Significant effect on price Significant effect on price
      - Analysis using expertise and resources Analysis using expertise and resources
      - Star analysts’ reports Star analysts’ reports
      - Shareholder activism Shareholder activism
  - Market Abuse Offences that Concern the Use of Information—the Offences Market Abuse Offences that Concern the Use of Information—the Offences
    - Market abuse (insider dealing)—Type 1 Market abuse (insider dealing)—Type 1
      - Types of conduct that fall within ‘insider dealing’ Types of conduct that fall within ‘insider dealing’
      - Types of conduct that are not ‘on the basis of’ inside information Types of conduct that are not ‘on the basis of’ inside information
        
        Safe harbour—implementing own intention to deal. Safe harbour—implementing own intention to deal.
        
        Material influence. Material influence.
      - Mosaic theory Mosaic theory
      - Wall crossing Wall crossing
      - Prior decisions to deal and pre-existing strategies Prior decisions to deal and pre-existing strategies
      - Market makers, dealers, and intermediaries Market makers, dealers, and intermediaries
      - The dutiful execution of client orders The dutiful execution of client orders
      - Legitimate business of market makers, etc. Legitimate business of market makers, etc.
      - Corporate finance and takeovers Corporate finance and takeovers
      - Review of cases and emerging themes Review of cases and emerging themes
        
        Corporate executives Corporate executives
        
        Market Professionals Market Professionals
        
        Debt Markets Debt Markets
    - Market abuse (improper disclosure)—Type 2 Market abuse (improper disclosure)—Type 2
      - Safe harbours Safe harbours
      - Examples of ‘improper disclosure’ Examples of ‘improper disclosure’
        
        Broker Cases Broker Cases
        
        Corporate brokers Corporate brokers
        
        Corporate executives Corporate executives
    - Market abuse (misuse of information)—Type 3 (legacy offence) Market abuse (misuse of information)—Type 3 (legacy offence)
      - ‘Types of conduct that do not constitute the ‘‘misuse of information’’’ ‘Types of conduct that do not constitute the ‘‘misuse of information’’’
      - The ‘regular user’ test The ‘regular user’ test
      - Examples of conduct which constitutes the ‘misuse of information’ Examples of conduct which constitutes the ‘misuse of information’
      - Review of cases Review of cases
    - Flow chart—offences relating to the use and disclosure of information Flow chart—offences relating to the use and disclosure of information
  - Market Abuse that Concerns Market Manipulation, Misleading Behaviour, or Distortion Market Abuse that Concerns Market Manipulation, Misleading Behaviour, or Distortion
    - Market abuse (manipulating transactions)—Type 4 Market abuse (manipulating transactions)—Type 4
      - Indications that behaviour is not for a legitimate reason Indications that behaviour is not for a legitimate reason
      - Indications that behaviour is for a legitimate reason Indications that behaviour is for a legitimate reason
      - Accepted market practices Accepted market practices
      - Types of conduct that fall within the definition of ‘manipulating transactions’ relating to false or misleading impressions Types of conduct that fall within the definition of ‘manipulating transactions’ relating to false or misleading impressions
      - Types of conduct that fall within the definition of ‘manipulating transactions’ relating to price positioning Types of conduct that fall within the definition of ‘manipulating transactions’ relating to price positioning
      - Review of cases relating to market abuse (manipulating transactions) Review of cases relating to market abuse (manipulating transactions)
        
        ‘Layering’ and arguments as to ‘legitimate reasons’ ‘Layering’ and arguments as to ‘legitimate reasons’
        
        Share ramping Share ramping
        
        Manipulation of Net Asset Value Manipulation of Net Asset Value
        
        Orders at the close Orders at the close
        
        Commodity Markets Commodity Markets
    - Market abuse (manipulating devices)—Type 5 Market abuse (manipulating devices)—Type 5
    - Market abuse (dissemination)—Type 6 Market abuse (dissemination)—Type 6
      - Review of cases Review of cases
    - Market abuse (misleading behaviour and distortion)—Type 7 (legacy offence) Market abuse (misleading behaviour and distortion)—Type 7 (legacy offence)
      - Review of cases relating to market abuse (misleading behaviour and distortion) Review of cases relating to market abuse (misleading behaviour and distortion)
        
        Short Selling Rules Short Selling Rules
    - Statutory exceptions Statutory exceptions
    - Takeover Code Takeover Code
  - FCA Principles FCA Principles
  - Discovering and Punishing Market Abuse Discovering and Punishing Market Abuse
    - Suspicious transaction reporting Suspicious transaction reporting
    - Appropriate reporting—practical issues Appropriate reporting—practical issues
    - Protected disclosures Protected disclosures
    - Interrelation with reports to SOCA Interrelation with reports to SOCA
    - Sanctions and enforcement policy—decision to enforce sanctions under the market abuse regime rather than prosecute a criminal offence Sanctions and enforcement policy—decision to enforce sanctions under the market abuse regime rather than prosecute a criminal offence
    - FCA’s power to impose penalties in cases of market abuse FCA’s power to impose penalties in cases of market abuse
    - FCA’s power to apply for restitution orders as a sanction for market abuse FCA’s power to apply for restitution orders as a sanction for market abuse
    - Injunctions in the cases of market abuse Injunctions in the cases of market abuse
    - Interrelation between different enforcement powers Interrelation between different enforcement powers
      - Misleading announcement by issuers Misleading announcement by issuers
    - Enforcement policy Enforcement policy
      - Approach Approach
    - Overview of effectiveness of the market abuse regime and trends in enforcement Overview of effectiveness of the market abuse regime and trends in enforcement
      - Enforcement of market abuse actions Enforcement of market abuse actions
  - European Developments—The Proposed Market Abuse Regulation and Criminal Sanctions Directive European Developments—The Proposed Market Abuse Regulation and Criminal Sanctions Directive
    - Overview of work undertaken by the EU institutions Overview of work undertaken by the EU institutions
    - Status Status
    - Timing Timing
    - Territorial scope Territorial scope
    - Scope of markets covered Scope of markets covered
    - Scope of instruments covered Scope of instruments covered
    - Definition of inside information Definition of inside information
    - Dealing or behaviour Dealing or behaviour
    - Market manipulation Market manipulation
    - Issuer announcements Issuer announcements
    - Safe harbours and clarifications Safe harbours and clarifications
    - Criminal offences Criminal offences
    - Electricity and gas markets Electricity and gas markets
  - Notes
  - Notes
- 10 Insider Dealing and Misleading Statements and Impressions
  - Notes
  - Notes
- 11 Money Laundering and Financial Crime
  - Notes
  - Notes
- 12 Regulation and Financial Disputes in the Civil Courts
  - Notes
  - Notes
- Notes
- Notes
- Index
  - Notes
  - Notes

Chapter

9 Market Abuse

Get access

https://doi.org/10.1093/law/9780199685592.003.0009

Pages

391–478

Published:

March 2014

Extract

Background to the Introduction of the Market Abuse Regime

Introduction

This chapter looks at the civil market abuse regime introduced under the Financial Services and Markets Act 2000 (‘FSMA’), as subsequently amended following the implementation of the EU directive on insider dealing and market manipulation (market abuse) (‘MAD’).¹

The chapter looks in turn at:

...

Directive 2003/6/EC on insider dealing and market manipulation (market abuse) and related directives.

Part VIII of FSMA introduced a broad new power to tackle suspected wrongful behaviour on financial markets, namely the ‘civil offence’ of market abuse under section 118 of FSMA. These market abuse provisions sit alongside other powers, most importantly, the criminal offences of misleading statements and impressions² and insider dealing,³ as well as the regulatory regime applying to regulated firms and individuals, and listed companies. The details of the market abuse regime are considered further in paragraph 9.17 et seq., but firstly this section will consider the background to the introduction of the market abuse provisions and, in particular, will focus on the practitioner and academic criticisms levelled against the pre-FSMA criminal law powers and the failure of certain high-profile prosecutions relating to wrongdoing on financial markets. This section also considers the impact of MAD which forms part of the market abuse regime. The scope and status of the new proposed EU market abuse regulation (‘Market Abuse Regulation’)⁴ and the proposed directive relating to criminal sanctions in relation to market abuse (‘CSD’)⁵ are discussed later in this chapter at paragraph 9.22 et seq.

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Contents

9 Market Abuse

Extract

Background to the Introduction of the Market Abuse Regime

Introduction

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Contents

9 Market Abuse

Extract

Background to the Introduction of the Market Abuse Regime

Introduction

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