HERBERT SMITH FREEHILLS’ 2019 GUIDE TO CORPORATE INVESTIGATIONS IN CHINA

Authors: Kyle Wombolt and Anita Phillips

Kyle Wombolt, global head of corporate crime and investigations, and Anita Phillips, professional support consultant, have updated their guide to corporate investigations in China. This forms part of GIR’s acclaimed text, The Practitioner’s Guide to Global Investigations 2019, third edition. It is regarded as the only text covering the nuts and bolts of multi-jurisdictional corporate investigations.

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FCA orders listed company to compensate investors following market abuse

The Financial Conduct Authority (FCA) has ordered that Tesco plc and Tesco Stores Limited (together, Tesco) pay compensation to certain Tesco shareholders and bondholders following the FCA's finding that they committed market abuse in relation to a trading update published in August 2014. 

On 29 August 2014, Tesco plc published, via a regulatory information service, a trading update which contained a statement as to its expected trading profit for half-year period just ended (the August trading update).  In producing that update, Tesco plc relied on information provided to it by its wholly-owned subsidiary, Tesco Stores Limited, which was not correct.  On 22 September 2014, Tesco plc published a further trading update in which it announced that it had “identified an overstatement of its expected profit for the half year, principally due to the accelerated recognition of commercial income and delayed accrual of costs.”

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#MAR_bitesize

Managers' Transactions – Restrictions and Notification Requirements

As was the case under the previous market abuse regime, MAR imposes various obligations on persons discharging managerial responsibility (PDMRs) in listed companies and their dealings in the securities of the company which they are connected to.

Notification requirement

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#MAR_bitesize

New Market Abuse powers for the FCA (2)

Powers to require information from issuers, PDMRs and persons closely associated to PDMRs

The Financial Services and Markets Act 2000 (Market Abuse) Regulations 2016 (the "regulations") were passed to ensure that UK law was compatible with the Market Abuse Regulation (MAR), to give effect to those parts of MAR which required implementing legislation, and to ensure it is fully enforceable in the UK. 

This issue of #MAR_bitesize considers the new power to require information from issuers, persons discharging managerial responsibilities within issuers (PDMRs), and persons closely associated to PDMRs under section 122A of FSMA. 

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New Market Abuse powers for the FCA

 

The Financial Services and Markets Act 2000 (Market Abuse) Regulations 2016

On 29 June 2016, the Government adopted the Financial Services and Markets Act 2000 (Market Abuse) Regulations 2016 (the "regulations").  This left negligible time for Parliamentary scrutiny before they came into force with the Market Abuse Regulation (EU) 596/2014 ("MAR") on 3 July 2016.

The purpose of the regulations was to amend UK law to ensure its compatibility with MAR, to give effect to those parts of MAR which required implementing legislation, and to ensure it is fully enforceable in the UK.  The regulations amend the Financial Services and Markets Act 2000 (FSMA) and give the Financial Conduct Authority ("FCA") new powers to:

  • require information from issuers and other persons;
  • compel the publication of information by issuers,
  • compel the publication of corrective statements by issuers and other persons;
  • suspend trading in financial instruments; and
  • impose penalties, prohibitions and suspensions or restrictions for contraventions of the market abuse regulation.

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Market abuse update – July 2016

The Market Abuse Regulation (MAR) and the Criminal Sanctions (Market Abuse) Directive came into application in Europe on 3 July 2016.  Various outstanding pieces of secondary legislation were published in the Official Journal shortly before then, and further material has emerged since 3 July. ESMA published final form guidelines in relation to delay in disclosure of inside information and market soundings and an updated MAR Q&A document on 13 July, and on 26 July, its final report on Draft Implementing Technical Standards on sanctions and measures under MAR. Further guidelines are expected later this year.

In our latest update, we discuss the implications of these developments, the secondary legislation under MAR and the changes made to the UK regulatory regime to accommodate it.  We also look at some recent enforcement actions in a range of different jurisdictions.

 

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Extra-territorial scope of MAR: impact on non-EU firms

Article 2(4) of MAR applies the "prohibitions and requirements" within MAR to behaviour that occurs both within the EU and in a third county.  In other words, MAR is intended to have extra-territorial effect, capturing individuals and firms operating outside of the EU. 

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Suspicious transaction and order reporting

Under Article 16 of MAR, market operators and investment firms operating a trading venue1, and any person professionally arranging or executing transactions, should have in place arrangements, procedures and systems for the detection and reporting of orders and transactions suspected of constituting insider dealing, market manipulation or attempted insider dealing or market manipulation. The obligations to detect and report market abuse are not limited to investment firms under MiFID; they extend to UCITS management companies, AIF managers and other firms professionally engaged in trading on own account (proprietary traders) such as energy trading companies.  Continue reading

#MAR_bitesize

MAR MONDAY

On 3 July 2016, the EU Market Abuse Regulation (MAR) (EU 596/2014) replaced the Market Abuse Directive (MAD) and the current UK regimes for market abuse and inside information.  To help guide you through the first six months under the new regime, we will be issuing fortnightly "bitesize" updates providing concise snapshots of a number of key practical areas of interest under MAR. This first "bitesize" update on MAR focuses on the impact that MAR will have on listed companies' decisions to delay the disclosure of inside information in the UK.   Continue reading

Market abuse update – April 2016

This will be our last quarterly Market Abuse update before 3 July 2016, the date when both the new Market Abuse Regulation and the Criminal Sanctions (Market Abuse) Directive come into application across Europe. Some significant pieces of the regulatory jigsaw have yet to be slotted into place, so we have set out the current state of play in a little more detail. Both pieces of legislation have significant extra-territorial implications: in this briefing we highlight some quirks in the potential application of the criminal regime.

The advent of new regulation has not led to any significant let-up of regulators' enforcement efforts, and this briefing also reviews some recent cases in the UK, the US and Australia. 

Our full e-bulletin is available here