15. Market abuse

Question 1

What are the three insider dealing offences?

Answer 1

S.52 of CJA 1993 sets out three insider dealing offences:

1. Dealing in price affected securites on the basis of inside information
2. Encouraging another person to deal in price-affected securities on the basis of inside information
3. Disclosing inside information

Question 2

When will a person have information as an insider?

Answer 2

Section 57(1) provides that a person has information as an insider if and only if:

1. it is, and they know that it is, inside information
2. they have, and know that they have it, from an inside source.

Question 3

What is inside information?

Answer 3

S.56 provides that inside information is information which:

• relates to particular securities, to a particular issuer - not to securities in generally or to issuers of securities generally;
• is specific or precise;
• has not been made public;
• if it were made public would be likely to have significant effect of the price of any securities

Question 4

Who is an insider?

Answer 4

S.57(1) provides that a person has information from an inside source only if and only if they have it through:

• being a director, employee or shareholder of an issuer of securities
• having access to information by virtue of their employment, office or profession
• the direct or indirect source of the information is a person within (a)

Question 5

What piece of EU legislation aims to combat market abuse?

Answer 5

2014 MAR (596/2014/EU)

Question 6

Which body is the competent authority for applying the EU rules on market abuse?

Answer 6

Financial Conduct Authority

Question 7

What types of activities can constitute market manipulation?

Answer 7

Article 12 of MAR sets out the types of activities that constitute market manipulation:

1. Entering into a transaction, placing an order to trade or any other behaviour which:
   - gives, or likely to give, false or misleading signals as to the supply of, demand of, a financial instrument
   - secures, or is likely to secure, the price of one or several financial instruments at an abnormal or artificial level
2. Entering into a transaction, placing an order to trade or any other activity or behaviour which affects, or likely to affect the price of one or several financial instruments, which employs a fictitious device or any other form of deception
3. Disseminating info through media which gives false or misleading signals as to the supply or demand or price of fin instrument; or secures the price of fin instruments at an abnormal or artificial level
4. Transmitting false or misleading info in relation to benchmark, where the person who made the transmission knew that it was false, or any other behaviour which manipulates the calculation of benchmark
5. Conduct by a person, or person acting in corraboration, to secure a dominant position over a supply/demand of fin instrument, which has the effect of fixing the price or create unfair trading conditions
6. Buying or selling of fin instruments at the opening and closing of the market, which has the effect of misleading investors acting on the basis of the prices displayed.

Question 8

What sanctions can be imposed upon a person who has engaged in market abuse?

Answer 8

Where a person (P) engages in prohibited insider dealing or market manipulation, then FSMA200 empowers the FCA to impose a range of sanctions upon that person:

• penalty (s.123)
• prohibition from occupying certain positions
• temporarily or permanently prohibiting from acquiring or disposing shares
• suspending, (up to 12 months) any permission to carry on a regulated activity
• imposing (up to 12 months) limitations and restrictions in relation to carrying on of a regulated activity by the