UK IMPLEMENTATION OF THE
MARKET ABUSE REGIME
DILWYN GRIFFITHS
HEAD OF MARKET MONITORING
FINANCIAL SERVICES AUTHORITY
23 MAY 2005
OVERVIEW
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Key changes required to the UK regime
Where we remain different
Intelligent copy out
Change in form but not substance – some
examples
• Towards a convergent EU approach on
market abuse
LEGISLATIVE FRAMEWORK
• EU Legislation
– Level 1 – MAD itself
– Level 2 – 3 Directives and 1 Regulation
• Domestic Implementation
– Changes to FSMA (Pt VIII and Pt VI)
– FSA Handbook
– NB HMT Regulations on research
KEY CHANGES (1)
4 Offences
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Misuse of information
False and misleading impressions
Distortion
Requiring and encouraging market abuse
KEY CHANGES (2)
…..Become 8 !
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Insider dealing
Improper disclosure
Misuse of information
Manipulating transactions
Manipulating devices
Dissemination of false and misleading
information
• Misleading behaviour and distortive behaviour
• Requiring and encouraging market abuse
KEY CHANGES (3)
Welcome to
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Mandatory Suspicious Transaction Reports
Insider Lists
Accepted Market Practices Concept
Front running as Market Abuse
Wider Requirements
– Markets and products caught
– Scope of disclosure rules
– Scope of dealing disclosures
– More investment research disclosures
KEY CHANGES (4)
Farewell
Regular User Test (for the most part)
Broad Trading Information Safe Harbour
WHERE WE DIFFER
• Markets Covered
– Aim, OFEX and Commodity Derivatives Markets as
well as current ISD ‘regulated markets’
• Misuse of ‘relevant’ information not generally
available as well as inside information
• Behaviour not just transactions and orders to
trade
• But sunset provisions
INTELLIGENT COPY OUT
THESIS
ANTITHESIS
STATUS QUO
COPY OUT
INTELLIGENT
COPY OUT
SYNTHESIS
INTELLIGENT COPY OUT (2)
• Use of Recitals
– Trading Information
• Pragmatic Reading of Text
– Insider Lists
Persons acting on behalf of issuers
• Dealing with Market Rumour
CHANGES IN FORM
• Legislation rewritten
• Code of Market Conduct completely
rewritten
• Disclosure Rules replace Chapter 9 of
Listing Rules
• Lots of new terminology (e.g. reasonable
investor test)
BUT NOT SUBSTANCE
BUT
• Abusive behaviour on 30 June will be
abusive behaviour on 1 July
• Legitimate behaviour not penalised
• Information disclosure requirements the
same (essentially)
A CONVERGENT EU APPROACH
• CESR MAD Group
– Accepted market practices
– Behaviour considered to be Market
Manipulation
– Signals of possible suspicious transactions
Can look at other issues
A CONVERGENT EU APPROACH (2)
But Limits to progress
– At least in short/medium term
• Inside information possession and use vs
“on the basis of”
• ‘Defences’ against a charge of insider
dealing
• Can’t expect regulators to harmonise
rules and approach if laws differ