Market abuse
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Joe Coffey* is a partner at Taylor Wessing and leads its Financial Services Law and Regulation Group. He specialises in providing across-the-board legal and regulatory advice to City of London financial institutions and to clients involved in cross-border investment and banking services on the international stage. He regularly advises on all aspects of exchange-traded securities, derivatives and commodities business, covering in particular the rules and trading procedures of the principal UK and other European derivatives exchanges and the LSE, and also advises on OTC transactions. He has an active funds practice.
Jonathan Overett Somnier is an associate in the Financial Services Law and Regulation Group at Taylor Wessing. *Head of Financial Services Law and Regulation Group, Taylor Wessing, Carmelite, 50 Victoria Street, Blackfriars, London EC4Y 0DX, UK. Tel: ⫹44 (0)20 7300 7000; Fax: ⫹44 (0)20 7300 7100; e-mail: [email protected]
Abstract Market abuse has come into the spotlight over the past year, not only as a result of the overhaul in the UK regulatory framework but also owing to the well-publicised examples of alleged abusive behaviour which have had a worldwide effect on the markets. This paper examines how the new regime is working in the UK, and considers the impact of recent events on thinking generally and, in particular, on the forthcoming legislation from the EU. Keywords: market abuse; code of market conduct; insider dealing; market manipulation; regular user test; Enron; IPO manipulation; spread-betting
Market abuse in the UK Introduction
On 1st December, 2001, section 118 of the Financial Services and Markets Act 2000 (FSMA) introduced in the UK the new civil offence of market abuse, encompassing three types of behaviour: misuse of information; giving false or misleading impressions; and distorting the market. Such behaviour must occur in relation to ‘qualifying investments’ traded on a ‘prescribed market’. A qualifying investment is any asset, right or interest provided it is traded on a prescribed market. To date, the prescribed markets are the seven UK-based recognised investment exchanges (RIEs) together with OFEX.1 Legislation and legal and regulatory
䉷 Henry Stewart Publications 1479-179X (2003)
requirements already existed in this area; for example, the criminal offences of insider dealing under part V of the Criminal Justice Act 1993 and the making of misleading statements or engaging in market manipulation contrary to section 397 FSMA,2 together with the rules of the RIEs and the self-regulatory organisations whose role has been taken over by the Financial Services Authority (FSA), and the City Code on Takeovers and Mergers (the Takeover Code). These offences and requirements continue to apply, but the market abuse offence adds a further layer with the key features that it is punished with civil sanctions, it is subject to the civil standard of proof, and it applies to both regulated and non-regulated persons. The
Vol. 3, 4, 323-331
Journal of Asset Management
323
Coffey
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