With effect from 3 July, the market abuse regime set out in the Financial Services and Markets Act 2000 has been repealed and replaced with the directly effective Market Abuse Regulation. The Regulation implements a reformed regime that is (by virtue of the Regulation) implemented harmoniously across the EU. There have also been consequential changes to the FCA Handbook (MAR and DTR).
Market abuse has long been a hot topic for the FCA. Indeed, earlier this year, one firm received a significant fine for failures in safeguards to prevent market abuse (see Enforcement Watch 19 "WH Ireland £1.2m fine and a restriction on its business"). The importance of the new regime is self-evident and its successful implementation has been described by the FCA as "a priority" for the year ahead.1 The new regime is of key importance for firms' risk management and consequently also from an Enforcement perspective.
Readers will likely be familiar with the preceding regime in FSMA and the FCA handbook (MAR and DTR). Many aspects of the preceding regime remain broadly the same under the Regulation and amended handbook, such as the definition of "inside information", the existence of safe harbours and the obligations on issuers in relation to disclosure and management of inside information. However, there are a number of changes and we set out below the key changes of note.
- The market abuse offences have been rationalised. The Regulation sets up three separate offences: insider dealing (whether attempted, or by recommending it to or inducing another party), unlawful disclosure of inside information and market manipulation (including attempted manipulation).
- The Regulation broadens the scope of the regime in the following key respects:
- In addition to instruments traded on regulated markets, the Regulation also applies to financial instruments traded on multi-lateral trading facilities ("MTF's"), MiFID II organised trading facilities ("OTF's") or linked instruments such as credit default swaps or contracts for difference. This is likely to increase the reach of the regime's extra-territoriality.
- The Regulation applies once a request for admission to trade on a regulated market, an MTF or an OFT has been made.
- The Regulation applies to the manipulation (or attempted manipulation) of benchmarks.
- The Regulation introduces the following changes of note to the operation of the regime:
- An additional "safe harbour" provision has been introduced to allow for legitimate pre-marketing provided certain disclosures and records are made. Firms looking to benefit from this must ensure that the requirements are met and supported by policies, systems and training.
- In relation to the disclosure rules for issuers with inside information, the obligation to disclose such information as soon as possible remains, with a carve-out for delaying that disclosure where there is risk of prejudice. However, under the Regulation, the FCA must be informed of the delayed disclosure once the information is released.
- There are added requirements in relation to the content of "insider lists" maintained by issuers.
- Dealings in shares of the issuer by persons discharging managerial responsibility are subject to new restrictions. Such dealings have to be disclosed to the issuer (as before), but there must also now be disclosure to the FCA. There are also new "closed period" requirements and exemptions that issuers must be aware of.