The three tests in the Act which must be satisfied in order to establish that behaviour (see MAR 1.3), whether by one person alone or by two or more persons jointly or in concert, amounts to market abuse are as follows:
"the behaviour is based on information which is not generally available to those using the market but which, if available to a regular user of the market, would or would be likely to be regarded by him as relevant when deciding the terms on which transactions in investments of the kind in question should be effected" (section 118(2)(a) of the Act) (see MAR 1.4);
"the behaviour is likely to give a regular user of the market a false or misleading impression as to the supply of, or demand for, or as to the price or value of, investments of the kind in question" (section 118(2)(b) of the Act) (see MAR 1.5);
"a regular user of the market would, or would be likely to, regard the behaviour as behaviour which would, or would be likely to, distort the market in investments of the kind in question" (section 118(2)(c) of the Act) (see MAR 1.6); and
the behaviour must be likely to be regarded by a regular user of the market as a failure on the part of the person concerned to observe the standard of behaviour reasonably expected of a person in the position of the person in question (see MAR 1.2 and MAR 1 Annex 4 (Frequently asked questions))1
Under section 123(1) of the Act, the FSA has the power either to impose a penalty, or to make a statement to the effect that a person has engaged in market abuse, if the FSA is satisfied that a person ("A"):
believed on reasonable grounds that his behaviour had not required or encouraged another person to engage in behaviour which, if engaged in by the first person, would have amounted to market abuse; or
had taken all reasonable precautions and exercised all due diligence to avoid requiring or encouraging another person to engage in behaviour, which, if engaged in by the first person, would have amounted to market abuse (see ENF 14.5) .
Under section 118(5) of the Act,behaviour will fall within the scope of the market abuse regime if it occurs in relation to qualifying investments which are traded on a prescribed market which is located in the United Kingdom or which is accessible electronically in the United Kingdom. (See MAR 1.11 for more detail on qualifying investments traded on a prescribed market.)
The Code also describes behaviour that, in the opinion of the FSA, does not amount to market abuse. Section 122(1) of the Act (Effect of the code) provides that such behaviour is to be taken conclusively, for the purposes of the Act, as not amounting to market abuse. The relevant sections of the Code are identified by the letter "C" and they are referred to in the Code as "safe harbours". (See MAR 1.4.20 C, MAR 1.4.21 C, MAR 1.4.24 C,MAR 1.4.26 C, MAR 1.4.28 C, MAR 1.5.24 C, MAR 1.5.25 C, MAR 1.5.27 C, MAR 1.5.28 C and MAR 1.6.19 C.)
In accordance with section 122(2) of the Act, some of the provisions of the Code identified by the letter "E" may be relied upon so far as they describe behaviour which, in the opinion of the FSA, amounts to market abuse. In addition, in accordance with section 119(2)(c) of the Act, other provisions in the Code identified by the letter "E" describe factors that, in the opinion of the FSA, are to be taken into account in determining whether or not behaviour amounts to market abuse.
The Code is not an exhaustive list of all types of behaviour which may, or may not, amount to market abuse, nor of all the factors to be taken into account in determining whether behaviour amounts to market abuse. The FSA may, subject to appropriate consultation, alter or replace the Code at any time.