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Status: You are viewing the version of the handbook as on 2016-02-03.

MAR 1.2 Market Abuse: general

MAR 1.2.1GRP

Provisions in this section are relevant to more than one of the types of behaviour which may amount to market abuse.

MAR 1.2.2UK

Table: section 118(1) of the Act

"For the purposes of this Act, [market abuse] is [behaviour] (whether by one person alone or by two or more persons jointly or in concert) which -

(a)

occurs in relation to:

(i)

[qualifying investments] admitted to trading on a [prescribed market], or

(ii)

[qualifying investments] in respect of which a request for admission to trading on such a market has been made, or

(iii)

in the case of subsections (2) and (3), investments which are [related investments] in relation to such [qualifying investments], and

(b)

falls within any one or more of the types of [behaviour] set out in subsections (2) to (8).

MAR 1.2.2AUK

Table: section 118(1) of the Act as modified by the RAP Regulations

3For the purposes of this Act, [market abuse] is [behaviour] (whether by one person alone or by two or more persons jointly or in concert) which -

(a)

occurs in relation to:

(i)

[qualifying investments] which are offered for sale on a [prescribed auction platform], or

(ii)

in the case of subsection (2) or (3), investments which are [related investments] in relation to such [qualifying investments], and

(b)

falls within any one or more of the types of [behaviour] set out in subsections (2) to (8A).

MAR 1.2.3GRP

Section 118(1)(a) of the Act does not require the person engaging in the behaviour in question to have intended to commit market abuse.

MAR 1.2.4G

Statements in this chapter to the effect that behaviour will amount to market abuse assume that the test in section 118(1)(a) of the Act has also been met.

Prescribed markets and qualifying investments: "in relation to": factors to be taken into account

MAR 1.2.5ERP

In the opinion of the FCA , the following factors are to be taken into account in determining whether or not behaviour prior to a request for admission to trading,3 the admission to or the commencement of trading, or the offer for sale on a prescribed auction platform3 satisfies section 118(1)(a) of the Act, and are indications that it does:

  1. (1)

    if it is in relation to qualifying investments:3

    1. (a)

      in respect of which a request for admission to trading on a prescribed market is subsequently made; and

    2. (b)

      if it continues to have an effect once an application has been made for the qualifying investment to be admitted for trading, or it has been admitted to trading on a prescribed market, respectively, or

  2. (2)

    3if it is in relation to qualifying investments:

    3
    1. (a)

      which are subsequently offered for sale on a prescribed auction platform; and

    2. (b)

      if it continues to have an effect once the qualifying investments are offered for sale on a prescribed auction platform.

MAR 1.2.6ERP

In the opinion of the FCA , the following factors are to be taken into account in determining whether or not refraining from action amounts to behaviour which satisfies section 118(1)(a) of the Act and are indications that it does:

  1. (1)

    if the person concerned has failed to discharge a legal or regulatory obligation (for example to make a particular disclosure) by refraining from acting; or

  2. (2)

    if the person concerned has created a reasonable expectation of him acting in a particular manner, as a result of his representations (by word or conduct), in circumstances which give rise to a duty or obligation to inform those to whom he made the representations that they have ceased to be correct, and he has not done so.

Insiders: factors to be taken into account

MAR 1.2.7UK

Table: section 118B of the Act

"For the purposes of [market abuse] an [insider] is any person who has [inside information] -

(a)

as a result of his membership of the administrative, management or supervisory bodies of an [issuer] of [qualifying investments],

(b)

as a result of his holding in the capital of an [issuer] of [qualifying investments],

(c)

as a result of having access to the information through the exercise of his employment, profession or duties,

(d)

as a result of his criminal activities, or

(e)

which he has obtained by other means and which he knows, or could reasonably be expected to know, is [inside information]."

MAR 1.2.7AUK

Table: section 118B of the Act as modified by the RAP Regulations

3For the purposes of [market abuse] an [insider] is any person who has [inside information]:

(a)

as a result of his membership of an administrative, management or supervisory body of an [auction platform] or its operator, an auctioneer or auction monitor,

(b)

as a result of his holding in the capital of an [auction platform] or its operator, an auctioneer or auction monitor,

(c)

as a result of having access to the information through the exercise of his employment, profession or duties,

(d)

as a result of his criminal activities, or

(e)

which he has obtained by other means and which he knows, or could reasonably be expected to know, is [inside information]."

MAR 1.2.8ERP

In the opinion of the FCA , the following factors are to be taken into account in determining whether or not a person could reasonably be expected to know that information in his possession is inside information and therefore whether he is an insider under section 118B(e) of the Act, and indicate that the person is an insider:

  1. (1)

    if a normal and reasonable person in the position of the person who has inside information would know or should have known that the person from whom he received it is an insider; and

  2. (2)

    if a normal and reasonable person in the position of the person who has inside information would know or should have known that it is inside information.

MAR 1.2.9GRP

For the purposes of the other categories of insider specified by section 118B(a) to (d), the person concerned does not need to know that the information concerned is inside information.

Inside information: factors to be taken into account

MAR 1.2.10UK

Table: section 118C(2) and (3) of the Act

"... [inside information] is information of a precise nature which -

(a)

is not generally available; ..."

MAR 1.2.11G

The phrase "precise nature" is defined in section 118C(5) of the Act. This phrase is also relevant to section 118C(4) of the Act.

1
MAR 1.2.12ERP

In the opinion of the FCA , the following factors are to be taken into account in determining whether or not information is generally available, and are indications that it is (and therefore not inside information):

  1. (1)

    whether the information has been disclosed to a prescribed market or a prescribed auction platform3 through a regulatory information service or RIS or otherwise in accordance with the rules of that market;

  2. (2)

    whether the information is contained in records which are open to inspection by the public;

  3. (3)

    whether the information is otherwise generally available, including through the Internet, or some other publication (including if it is only available on payment of a fee), or is derived from information which has been made public;

  4. (4)

    whether the information can be obtained by observation by members of the public without infringing rights or obligations of privacy, property or confidentiality; and

  5. (5)

    the extent to which the information can be obtained by analysing or developing other information which is generally available. [Note: Recital 31 Market Abuse Directive]

MAR 1.2.13ERP
  1. (1)

    In relation to the factors in MAR 1.2.12E it is not relevant that the information is only generally available outside the UK.

  2. (2)

    In relation to the factors in MAR 1.2.12E (1), (3), (4) and (5) it is not relevant that the observation or analysis is only achievable by a person with above average financial resources, expertise or competence.

MAR 1.2.14GRP

For example, if a passenger on a train passing a burning factory calls his broker and tells him to sell shares in the factory's owner, the passenger will be acting on information which is generally available, since it is information which has been obtained by legitimate means through observation of a public event.

MAR 1.2.15UK

Table: section 118C(4) of the Act

"In relation to a person charged with the execution of orders ... [inside information] includes information conveyed by a client and related to the client's pending orders ..."

MAR 1.2.15AUK

Table: section 118C(4) of the Act as modified by the RAP Regulations

3In relation to a person charged with the execution of bids ... [inside information] includes information conveyed by a client and related to the client's pending bids ...

MAR 1.2.16ERP

In the opinion of the FCA , a factor which indicates that there is a pending order or bid3 for a client is, if a person is approached by another in relation to a transaction, and:

  1. (1)

    the transaction is not immediately executed on an arm's length basis in response to a price quoted by that person; and

  2. (2)

    the person concerned has taken on a legal or regulatory obligation relating to the manner or timing of the execution of the transaction.

Inside information: commodity derivatives

MAR 1.2.17G

The Act (and the Market Abuse Directive) recognise that there are differences in the nature of information which is important to commodity derivatives markets and that which is important to other markets. In particular, inside information is limited by reference to what the market participants expect to receive information about.

MAR 1.2.18UK

Table: section 118C(3) of the Act

"In relation to [qualifying investments] or [related investments] which are commodity derivatives, [inside information] is information of a precise nature which ... (c) users of markets in which the derivatives are traded would expect to receive in accordance with any accepted market practices on those markets."

MAR 1.2.19UK

Table: section 118C(7) of the Act

"For the purposes of subsection (3)(c), users of markets on which investments in commodity derivatives are traded are to be treated as expecting to receive information ... which is -

(i) routinely made available to the users of those markets, or

(ii) required to be disclosed in accordance with any statutory provision, market rules, or contracts or customs on the relevant underlying commodity market or commodity derivatives market."

The regular user

MAR 1.2.20G

In section 118 of the Act, the regular user decides:

  1. (1)

    [deleted]4

    4
  2. (2)

    whether behaviour:

    1. (a)

      [deleted]4

      4
    2. (b)

      creates or is likely to create a false or misleading impression or distorts the market or the auction of investments of the kind in question3 (section 118(8)); or

    3. (c)

      which creates or is likely to create a false or misleading impression or distorts the market or the auction of investments of the kind in question3 is below the expected standard (section 118(8)).

MAR 1.2.21G

The regular user is a hypothetical reasonable person who regularly deals on the market and in the investments of the kind in question or bids on the auction platform in relation to investments of the kind in question.3 The presence of the regular user imports an objective element into the elements listed in MAR 1.2.15 UK while retaining some subjective features of the markets for, or the auction of,3 the investments in question.

Requiring or encouraging

MAR 1.2.22UK

Table: section 123(1)(b) of the Act

"If [the FCA ] is satisfied that a person ("A") - ...

(b) by taking or refraining from taking any action has required or encouraged another person or persons to engage in [behaviour], which if engaged in by A, would amount to [market abuse],

it may impose on him a penalty of such amount as it considers appropriate.

MAR 1.2.23GRP

The following are examples of behaviour that might fall within the scope of section 123(1)(b) :

  1. (1)

    a director of a company, while in possession of inside information, instructs an employee of that company to deal in qualifying investments or related investments in respect of which the information is inside information;

  2. (2)

    a person recommends or advises a friend to engage in behaviour which, if he himself engaged in it, would amount to market abuse.