The government has published the Financial Services and Markets Act 2000 (Market Abuse) Regulations 2016, which make a number of amendments to FSMA 2000, and to other primary and secondary legislation, for the purposes of implementing the Market Abuse Regulation (MAR). The Regulations differ in a number of respects from the draft version published for comment by HM Treasury in December 2015 and come into force on 3 July 2016.
The current EU framework for tackling market abuse and market manipulation was first introduced in 2005 under the Market Abuse Directive (MAD). In order to ensure that the conduct regulation keeps pace with market developments, the European Commission began consultation on MAR in 2011, with agreement being reached in 2014.
MAR now directly prohibits insider dealing, together with other linked activities, and market manipulation. The key changes introduced by MAR include:
- extending the market abuse regime to apply not only to financial instruments admitted to trading on a regulated market, but to financial instruments on other trading platforms such as MTFs, *OTFs and related financial instruments;
- extending the market abuse rules to cover EU emissions allowances (though some allowances were already caught by MAD and others by the bespoke regime under the emissions allowance auctioning regulation);
- bringing the manipulation of benchmarks expressly within the market manipulation offence;
- the introduction of a new prohibition on attempted market manipulation;
- the introduction of a specific format for insider lists;
- a new requirement to notify the regulator on announcement of inside information where the issuer has delayed the announcement of that information;
- the introduction of a specific regime for the disclosure of inside information in the course of market soundings; and
- the extension of the Suspicious Transaction Reporting (STR) regime to cover suspicious orders.
The significant changes made by the Regulations are as follows:
- the FCA is designated as the UK competent authority for the purposes of MAR
- rules are put in place governing when issuers must provide the FCA with an explanation of a delay in disclosing inside information;
- a procedure is put in place for applications under MAR;
- the UK’s domestic regime on disclosure rules in respect of financial instruments and civil penalties for market abuse is repealed;
- the FCA is given 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 MAR;
- The meaning of the term ‘person closely associated’ in the market abuse regime is defined
- The current market abuse regime for certain types of emission allowances is updated to ensure that the FCA has similar powers under that regime as they do under MAR; and
- The FCA is given a number of duties in connection with the reporting of contraventions of MAR, in order to implement the supplementary directive on reporting infringements of MAR.
As MAR is a regulation, it will have direct effect in the UK from 3 July 2016. The Regulations will also have effect from this date, but *those provisions relating to OTFs and SME growth markets will apply from 3 January 2018, being the new application date of MiFID II.