Market Abuse Part 1 Flashcards
Insider Dealing Law/Statutory offences / who commit
Criminal Justice Act 1993 , Section 52 + 53
Dealing, Encouraging, Disclosing
Individual, inside info , as an insider
what is inside information
1) Particular issuer/particular issue
2) Specific or precise
3) has not been made public
4) price sensitive
How info made public
- published with rules of a regulated market - DTR
- In records open to public inspection
- Can be readily acquired by those likely to deal
- Derived from info which has been made public
Who is insider
What is inside source
He knows ;
it is inside information
it is from an inside source
Direct inside source - director/employee/shareholder
via employment/office
Indirectly - spouse / drinking buddy = secondary / indirect source
What deals are covered under insider dealing
In scope of CJA 1993
Deals on a regulated market, MTF or OTF
Deals through or as professional intermediary
Which financial instruments are covered within scope CJA
- shares/ options on shares
- Gilts/corporate bonds
- Warrants
- Depositary receipts
- Futures
- CFDs
can be traded on an exchange
General Defences of Insider Dealing
Law- S53 CJA 1993
Anyone can use these defences
1) No advantage was expected (did not think price sensitive)
2) Would have acted liked that anyway, even without info
3) Reasonable belief that info had been widely disclosed
Disclosure offence;
- did not expect any dealing to take place due to the disclosure
Special Defences of Insider Dealing
ONLY available in limited situations in financial services industry
1) Market maker (acting in good faith in ordinary course of business) - i.e. firms proving liquidity on exchange
2) Stabilisation ( if done in terms of EU Mar rules)
3) Market Information
Enforcement procedures / Evidence and penalties - Insider Dealing
LSE insider dealing group
FCA Investigation possible - STOR + Transaction reports
Normal criminal prosecution - FCA
- Criminal standard of evidence - ( beyond all reasonable doubt)
- 7 Years jail + unlimited fine = crown court
Misleading Statements
( FSA 2012 s89)
Deliberate deceit & recklessness
Covers things said and things not said
Causes an alter of position for the worse
Misleading impressions
(FSA 2012 s90)
NOT lying but, market manipulation
Act/conduct ( start false rumour) intended to
- false impression in market in investments
- price/ value of investments
Penalties for Misleading Statements/Impressions
Criminal penalty
6 months in jail / 5,000 fine (magistrate)
Indictment - 7 years in jail / unlimited fine
Is being increased into 10 years coming into force of FSA 2021 - date not been set yet
Offence no 1 in relation to benchmarks
Lying in relation to benchmarks - Libor rigging scandal example
(FSA 2012 s91(1))
A makes false or misleading statement to B
all as part of arrangements to set benchmark
intends to use statement
A knows statement is false or misleading
Offence no 2 in relation to benchmarks
(FSA 2012 s91(2))
Act/ conduct creates false/misleading impression
price/value of investment or
interest rate
intending to create impression and knows that it is false/misleading
Impression may affect the setting of benchmark
Market Abuse Laws
CJA 1993 , Section 52+53
- covers insider dealing , missing info
FSA 2012 ss89-91
- covers misleading statements and misleading impressions
Both of above criminal courts, using criminal standard of evidence ( beyond on all reasonable doubt )
MAR Market abuse regulation ( has much wider scope)
Covers market abuse
Dealt with by civil regulator (FCA) , using civil standard of evidence (balance of probability
