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From: Market Abuse Regulation (3rd Edition)
Edward J Swan, John Virgo

16 Conclusions »

From: Market Abuse Regulation (3rd Edition)
Edward J Swan, John Virgo
This chapter presents some final thoughts. The UK and the EU have undeniably made a determined effort to install a flexible and effective regime to deter and punish market abuse. The very fact that the market abuse regime causes so much comment in the financial services industry is one measure of its success. It is not a simple regime. To many, it is worryingly complex and, with the introduction of EU anti-market abuse law and regulations, and the implementation of the EU Market Abuse Regulation in 2016, has become even more so. However, so is market abuse. To keep pace with the chameleon-like changeability of schemes to win unfair profits in the financial markets, the regulators need a significant degree of indeterminate flexibility.

Contents »

From: Market Abuse Regulation (3rd Edition)
Edward J Swan, John Virgo

Contents—Summary »

From: Market Abuse Regulation (3rd Edition)
Edward J Swan, John Virgo

13 Criminal Law »

From: Market Abuse Regulation (3rd Edition)
Edward J Swan, John Virgo
This chapter considers the relationship of the market abuse regime to criminal law. The market abuse regime was not intended to replace existing criminal laws but conceived to work alongside them — while covering a wider range of activities. Indeed, the Financial Conduct Authority (FCA) is empowered to institute criminal proceedings for a range of offences and in respect of certain other offences arising under related legislation. Although this was not originally intended, the market abuse prohibitions are part of criminal law. Although the market abuse regime was originally created to provide the FCA with a flexible administrative remedy for market misconduct, the range of available enforcement options makes it legally impossible not to treat at least some market abuse cases as criminal proceedings.

Dedication Page »

From: Market Abuse Regulation (3rd Edition)
Edward J Swan, John Virgo

11 Defences »

From: Market Abuse Regulation (3rd Edition)
Edward J Swan, John Virgo
This chapter discusses defences to allegations of market abuse. These consist of five basic types: (a) objections to personal or subject matter jurisdiction; (b) compliance with relevant regulatory rules; (c) being within an exemption; (d) evidential defences consisting of other factors indicating that behaviour did not constitute market abuse; and (e) the person in question is acting on behalf of a public authority with respect to: (i) monetary policies, (ii) exchange rate or public debt management policies; or (iii) foreign exchange reserves policies. The Financial Conduct Authority states that behaviour which conforms with article 5 of the Market Abuse Regulation or with a directly applicable EU regulation made under article 5 of the Market Abuse Regulation will not amount to market abuse.

3 Defining Market Abuse »

From: Market Abuse Regulation (3rd Edition)
Edward J Swan, John Virgo
This chapter focuses on the issue of market abuse, covering the genesis of market abuse, defining ‘behaviour’, and the scope of UK market abuse regulation. The types of behaviour which can constitute market abuse include directly or indirectly: using information not publicly available that is likely to have a significant effect on prices of financial instruments (or related derivatives) to the advantage of oneself or to the advantage of others; transactions or orders which give or are likely to give false or misleading signals about supply, demand or price of financial instruments, or which move such prices to artificial levels, or which employ any form of deception or contrivance; and disseminating information giving or likely to give false or misleading signals as to financial instruments.

9 Enforcement Procedure »

From: Market Abuse Regulation (3rd Edition)
Edward J Swan, John Virgo
This chapter discusses the enforcement of Market Abuse Regulation. The Regulation was not intended to replace national provisions regarding regulatory authorities. However, it was intended to support the creation of a single competent authority for regulating market abuse within each Member State. That authority was required to be given a minimum list of powers in order to correctly implement and enforce the Regulation provisions. Both before and after the Regulation, the ‘Authority’ charged with enforcing market abuse regulation in the UK is the Financial Conduct Authority (FCA). The discussions cover FCA market abuse enforcement powers, basic FCA enforcement policy, the enforcement referral decision, post-referral investigation, informal disciplinary action, formal disciplinary action, the Regulatory Decisions Committee, settlement, private actions, and complaints to the Financial Conduct Authority.

1 Evolving Regulation »

From: Market Abuse Regulation (3rd Edition)
Edward J Swan, John Virgo
This chapter begins with a background on financial services regulation in the UK. The principal responsibility for regulating financial market conduct generally, and for preventing, investigating, and punishing market abuse falls on the Financial Conduct Authority (FCA). The aims of the FCA are both to preserve financial stability and the expection that it will remain stable. One of the principal ways that this is done is by preventing what is called ‘market abuse’, which can generally be described as improper market behaviour, such as: insider trading; various techniques of market manipulation; and any other behaviour interfering with the fair and efficient operation of financial markets. The remainder of the chapter discusses the evolution of market abuse regulation; the adoption and implementation in the UK of the new EU Market Abuse and Insider Trading Directive, the Market Abuse Regulation, and for wholesale energy markets, the REMIT, international complications, and other levels of uncertainty.

Further Material »

From: Market Abuse Regulation (3rd Edition)
Edward J Swan, John Virgo

12 Hearings and Appeals »

From: Market Abuse Regulation (3rd Edition)
Edward J Swan, John Virgo
This chapter focuses on the Financial Services and Markets Tribunal, Tribunal rules, and hearings. The Tribunals, Courts and Enforcement Act 2007 established a new tribunal structure comprising a First-tier Tribunal and an Upper Tribunal. Appeal functions of existing tribunals, including the former Financial Services and Markets Tribunal, were transferred to this structure and assigned to chambers within the new tribunals. The Tribunal has broad powers with respect to FCA (and PRA) disciplinary decisions. A reference to the Tribunal is not really an ‘appeal’. It is a new hearing on the issues before a new, and independent, forum. The Tribunal may consider any relevant evidence and may direct any decision which the Financial Conduct Authority could originally have made. In effect, the review undertaken by the Tribunal is by way of a hearing de novo

4 Insider Dealing »

From: Market Abuse Regulation (3rd Edition)
Edward J Swan, John Virgo
This chapter examines what constitutes insider information, covering insider dealing under the Market Abuse Regulation; definition of inside information; case examples on inside information; financial instruments; and energy, emission allowances, and other commodity-related derivatives. Insider dealing has been the variety of market abuse that has been most enthusiastically prosecuted by the market regulators to date. A large percentage of the penalties that have been imposed for market abuse have been in insider dealing cases. This is because the nature of insider dealing leaves a relatively clear paper record of the transactions that constituted the transactions in question. Consequently, it is not that difficult for the Financial Conduct Authority to assemble clear proof that an insider has engaged in, or assisted, improper trading.

6 Interpretation »

From: Market Abuse Regulation (3rd Edition)
Edward J Swan, John Virgo
This chapter discusses the interpretation and understanding of the statutes and other regulating provisions on market abuse. The fundamental standard of behaviour is relatively simple: the duty not to compromise the fair and efficient operation of the market or to unfairly damage investors. However, the ways in which this standard will be applied and interpreted are many and flexible. The discussion covers the Code of Market Conduct and Market Abuse Regulation, and the term ‘likely’, which frequently appears in the statutory and Handbook sections relating to market abuse. The term is used to emphasize that in a number of cases, market abuse can result not only from conduct that does cause a particular effect, but also from conduct ‘likely’ to have such an effect.

8 Judging Behaviour »

From: Market Abuse Regulation (3rd Edition)
Edward J Swan, John Virgo
Once the basic standards of behaviour required of market participants are known, market participants will still have questions about how their behaviour in the market will be compared to the prevailing standards of market behaviour. These questions will include: (a) Who is the person being judged? (b) What guides will they use to compare the conduct of the responsible actor against the behaviour expected of a market participant in the actor's position? (c) Who will be judge(s) of whether market misconduct occurred? The answers to these issues are not entirely obvious from the Market Abuse Regulation or the FCA Code of Market Conduct. This chapter will attempt to explain them in more detail.

List of abbreviations »

From: Market Abuse Regulation (3rd Edition)
Edward J Swan, John Virgo

14 Market Abuse Cases »

From: Market Abuse Regulation (3rd Edition)
Edward J Swan, John Virgo
The Financial Conduct Authority's regulatory remit covers a wide variety of financial instruments and activities. Those wide powers, in combination with regulatory flexibility, is now badly needed. This chapter discusses some selected regulatory decisions and benchmark cases on market abuse. These regulatory decisions cover the following cases: Robert Middlemiss, Arif Mohammed, Peter Bracken, Michael Thomas Davies, Shell, Evolution Beeson Gregory and Christopher Potts, Robin Mark Hutchings, Jason Smith, and Indigo Capital LLC and Robert Johan Henri Bonnier, David Isaacs, Jonathan Malins, GLG Partners LP and Philippe Jabré, Sean Pignatelli, Woolworths Group Plc, Stewart McKegg, and Boyen and Boyen. The benchmark cases include Barclays Bank plc, UBS, other LIBOR Penalties; and foreign exchange, commodity and ISDAfix.

Market Abuse Regulation »

Edward J Swan, John Virgo

5 Market Manipulation »

From: Market Abuse Regulation (3rd Edition)
Edward J Swan, John Virgo
This chapter discusses market manipulation, the second general type of activity which constitutes market abuse under the Regulation. It covers manipulative behaviour, accepted market practices, indicators of manipulation, and the Financial Conduct Authority (FCA) on market manipulation. Prohibition of both market manipulation, and the brand-new offense of attempted market manipulation, is found in Article 15 of the Regulation, which states: A person shall not engage in or attempt to engage in market manipulation. Market manipulation is a complex category of market abuse that makes difficult to prove, and therefore difficult to punish. Unusual changes to market prices can have many causes. It is not easy to show that any particular change was a result of any particular factor. However, the FCA has other regulatory tools at its disposal to avoid the difficulties that proving ‘market manipulation’ may present.

10 Penalties and Sanctions »

From: Market Abuse Regulation (3rd Edition)
Edward J Swan, John Virgo
This chapter considers the penalty and sanctions regime as it applies to cases of market misconduct in the UK. This regime has a dual purpose. First, it serves the Financial Conduct Authority's ‘integrity objective’: that is, the ‘operational objective’ of protecting and enhancing the integrity of the UK financial system, which includes the UK financial system not being affected by insider dealing, unlawful disclosure of inside information, market manipulation and market abuse. Secondly, the regime gives effect to the Market Abuse Regulation (MAR), which identified in recital 70 that ‘[a] sound prudential and conduct of business framework for the financial sector should rest on strong supervisory, investigation and sanction regimes... supervisory authorities should be ... able to rely on equal, strong and deterrent sanction regimes against all financial misconduct, and sanctions should be enforced effectively’.