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.
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.
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.
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
With just under 5 weeks to go before the Market Abuse Regulation comes into application across the EU, the European Securities and Markets Authority (ESMA) on Monday clarified that the obligations to detect and report market abuse under Article 16(2) of MAR (and the implementing technical standards once they are finalised) apply not just to investment firms under MiFID, but also to UCITS management companies, AIF managers and firms professionally engaged in trading on own account (proprietary traders) such as energy trading companies.
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.
In September, the European Securities and Markets Authority (ESMA) published the final draft of its technical standards for the Market Abuse Regulation (EU MAR), which will replace the current civil regime on 3 July 2016. EU MAR and the associated Level 2 measures considerably expand the scope of the present regime, introducing more stringent regulation and significant new procedural requirements in a number of key areas. We await publication of the further guidance mandated by EU MAR, and the European Commission's adoption of the Level 2 measures.
On 3 August, the UK’s Serious Fraud Office (SFO) secured a conviction on eight counts of conspiracy to defraud against a former trader. He was sentenced to 9.5 years imprisonment in respect of the first four counts, each to run concurrently, and 4.5 years imprisonment for the next four, each to run concurrently to each other, but consecutively with the first four – a total of 14 years imprisonment. Confiscation proceedings will be determined at a later date. Continue reading
2014 was marked by record fines for benchmark manipulation globally, criminal prosecutions for insider trading and market manipulation, and the first publication of warning notices. The start of 2015 has seen some notable cases in the UK, US and Australia, and as the FCA makes individual accountability a priority in its business plan, it has taken its first public LIBOR actions against senior managers and traders. Several important court rulings in Europe have impacted the interpretation Continue reading
In its first business plan, the FCA promised to continue to treat market abuse as a priority. Last week, the FCA published details of its first successful enforcement action against a high frequency trader, and today, made four further insider dealing arrests, demonstrating the FCA’s commitment to tackle market abuse with at least as much determination as its predecessor. Firms should be considering their response to the many developments in the market abuse regime and where appropriate, making adjustments to policies, procedures, systems and controls. Continue reading