MAR 1.3 Market abuse (insider dealing)

The following behaviours are, in the opinion of the FCA , market abuse (insider dealing):

1. (1)

   dealing on the basis of inside information which is not trading information;

2. (2)

   front running/pre-positioning - that is, a transaction for a person's own benefit, on the basis of and ahead of an order (including an order relating to a bid)4 which he is to carry out with or for another (in respect of which information concerning the order is inside information), which takes advantage of the anticipated impact of the order on the market or auction clearing41 price;

3. (3)

   in the context of a takeover, an offeror or potential offeror entering into a transaction in a qualifying investment, on the basis of inside information concerning the proposed bid, that provides merely an economic exposure to movements in the price of the target company's shares (for example, a spread bet on the target company's share price); and

4. (4)

   in the context of a takeover, a person who acts for the offeror or potential offeror dealing for his own benefit in a qualifying investment or related investments on the basis of information concerning the proposed bid which is inside information.

In the opinion of the FCA , the following factors are to be taken into account in determining whether or not a person's behaviour is "on the basis of" inside information, and are each indications that it is not:

1. (1)

   if the decision to deal or attempt to deal was made before the person possessed the relevant inside information; or

2. (2)

   if the person concerned is dealing to satisfy a legal or regulatory obligation which came into being before he possessed the relevant inside information; or

3. (3)

   if a person is an organisation, if none of the individuals in possession of the inside information:

   1. (a)

      had any involvement in the decision to deal; or

   2. (b)

      behaved in such a way as to influence, directly or indirectly, the decision to engage in the dealing; or

   3. (c)

      had any contact with those who were involved in the decision to engage in the dealing whereby the information could have been transmitted.

In the opinion of the FCA , if the inside information is held behind an effective Chinese wall, or similarly effective arrangements, from the individuals who are involved in or who influence the decision to deal, that indicates that the decision to deal by an organisation is not "on the basis of" inside information.

In the opinion of the FCA , if the inside information is not limited to trading information, (except in relation to an agreement for the underwriting of an issue of financial instruments) that indicates that the behaviour is not in pursuit of legitimate business.

In the opinion of the FCA , the following factors are to be taken into account in determining whether or not a person's behaviour is in pursuit of legitimate business, and are indications that it is:

1. (1)

   the extent to which the relevant trading by the person is carried out in order to hedge a risk, and in particular the extent to which it neutralises and responds to a risk arising out of the person's legitimate business; or

2. (2)

   whether, in the case of a transaction on the basis of inside information about a client's transaction which has been executed, the reason for it being inside information is that information about the transaction is not, or is not yet, required to be published under any relevant regulatory or exchange obligations; or

3. (3)

   whether, if the relevant trading by that person is connected with a transaction entered into or to be entered into with a client (including a potential client), the trading either has no impact on the price or there has been adequate disclosure to that client that trading will take place and he has not objected to it; or

4. (4)

   the extent to which the person's behaviour was reasonable by the proper standards of conduct of the market concerned, taking into account any relevant regulatory or legal obligations and whether the transaction is executed in a way which takes into account the need for the market as a whole to operate fairly and efficiently.

In the opinion of the FCA , if the person acted in contravention of a relevant legal, regulatory or exchange obligation, that is a factor to be taken into account in determining whether or not a person's behaviour is in pursuit of legitimate business, and is an indication that it is not.

In the opinion of the FCA , if the inside information is not limited to trading information, that indicates that the behaviour is not dutiful carrying out of an order on behalf of a client.

In the opinion of the FCA , the following factors are to be taken into account in determining whether or not a person's behaviour is dutiful execution of an order (including an order relating to a bid)41 on behalf of another, and are indications that it is:

1. (1)

   whether the person has complied with the applicable provisions of COBS 2 , or their equivalents in the relevant jurisdiction; or

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2. (2)

   whether the person has agreed with its client it will act in a particular way when carrying out, or arranging the carrying out of, the order; or

3. (3)

   whether the person's behaviour was with a view to facilitating or ensuring the effective carrying out of the order; or

4. (4)

   the extent to which the person's behaviour was reasonable by the proper standards of conduct of the market or auction platform41 concerned and (if relevant) proportional to the risk undertaken by him; or

5. (5)

   whether, if the relevant trading or bidding (including the withdrawal of a bid)41 by that person is connected with a transaction entered into or to be entered into with a client (including a potential client), the trading or bidding41 either has no impact on the price or there has been adequate disclosure to that client that trading or bidding41 will take place and he has not objected to it.

In the opinion of the FCA , the following factors are to be taken into account in determining whether or not a person's behaviour is for the purpose of him gaining control of the target company or him proposing a merger with that company, and are indications that it is:

1. (1)

   whether the transactions concerned are in the target company's shares; or

2. (2)

   whether the transactions concerned are for the sole purpose of gaining that control or effecting that merger.