On 15 December 2014, the Financial Services and Markets Act 2000 (Market Abuse) Regulations 2014 (the New Regulations) will come into force. The New Regulations extend the expiry date of the prohibition of a category of market manipulation in section 118(8) of Financial Services and Markets Act 2000 (FSMA) and associated provisions to 3 July 2016.
Section 118(8) FSMA - a category of market manipulation
Section 118(8) of FSMA concerns behaviour (not falling within manipulating transactions, manipulating devices or dissemination) which either (a) is likely to give a regular user of the market a false or misleading impression as to the supply of, demand for, or price or value of, qualifying investments; or (b) would be, or would be likely to be, regarded by a regular user of the market as behaviour that would distort, or would be likely to distort, the market in such an investment, and which a regular user of the market is likely to regard there as being a failure on the part of the person concerned to observe the expected standard of behaviour.
Background to the ''sunset provisions''
Since 2008, the Government has considered whether this section remains justified given that it is broader in scope than the corresponding provision in the Market Abuse Directive (MAD). During its ongoing review, the Government has decided to extend the expiry date of the provisions several times (most recently to 31 December 2014), pending the outcome of the European Commission's review of the MAD. The European Commission's review has culminated in the new Market Abuse Regulation (MAR) published in the Official Journal in July this year which strengthens and updates the existing regime under MAD and incorporates a new concept of market manipulation similar in scope to that provided by section 118(8) FSMA. Consequently, the Government has decided to extend the expiry date of the provision until 3 July 2016, when it will be replaced by MAR which must be implemented by member states by the same date.
Expiry of section 118(4) FSMA - misuse of information
Section 118(4) (which concerns misuse of information in circumstances where a regular user of the market is likely to regard there as being a failure on the part of the person concerned to observe the expected standard of behaviour) was also previously subject to an expiry date of 31 December 2014 for the same reasons; however, the New Regulations will not extend its expiry date and the provision will cease to have effect thereafter. Click here to read the New Regulations and here to read the explanatory note.