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MAR 1.4 Market abuse (improper disclosure)

MAR 1.4.1UK

Table: section 118(3) of the Act

"The second [type of behaviour] is where:

an [insider]

discloses

[inside information]

to another person

otherwise than in the proper course of the exercise of his employment, profession or duties."

Descriptions of behaviour that amount to market abuse (improper disclosure)

MAR 1.4.2ERP

The following behaviours are, in the opinion of the FSA, market abuse (improper disclosure):

  1. (1)

    disclosure of inside information by the director of an issuer to another in a social context; and

  2. (2)

    selective briefing of analysts by directors of issuers or others who are persons discharging managerial responsibilities.

Descriptions of behaviour that does not amount to market abuse (improper disclosure)

MAR 1.4.3CRP

Disclosure of inside information will not amount to market abuse (improper disclosure), if it is made:

  1. (1)

    to a government department, the Bank of England, the Competition Commission, the Takeover Panel or any other regulatory body or authority for the purposes of fulfilling a legal or regulatory obligation; or

  2. (2)

    otherwise to such a body in connection with the performance of the functions of that body.

MAR 1.4.4CRP

Disclosure of inside information which is required or permitted by Part 6 rules (or any similar regulatory obligation) will not amount to market abuse (improper disclosure).

Factors to be taken into account in determining whether or not behaviour amounts to market abuse (improper disclosure)

MAR 1.4.5ERP

In the opinion of the FSA whether the disclosure is permitted by the rules of a prescribed market , of the FSA or the Takeover Code; or, the following factors are to be taken into account in determining whether or not the disclosure was made by a person in the proper course of the exercise of his employment, profession or duties, and are indications that it was:

  1. (1)

    whether the disclosure is permitted by the rules of a prescribed market, of the FSA or the Takeover Code; or

  2. (2)

    whether the disclosure is accompanied by the imposition of confidentiality requirements upon the person to whom the disclosure is made and is:

    1. (a)

      reasonable and is to enable a person to perform the proper functions of his employment, profession or duties; or

    2. (b)

      reasonable and is (for example, to a professional adviser) for the purposes of facilitating or seeking or giving advice about a transaction or takeover bid; or

    3. (c)

      reasonable and is for the purpose of facilitating any commercial, financial or investment transaction (including prospective underwriters or placees of securities); or

    4. (d)

      reasonable and is for the purpose of obtaining a commitment or expression of support in relation to an offer which is subject to the Takeover Code; or

    5. (e)

      in fulfilment of a legal obligation, including to employee representatives or trade unions acting on their behalf; or2

      2
  3. (3)

    whether:2

    1. (a)

      the information disclosed is trading information;2

    2. (b)

      the disclosure is made by a person ("A") only to the extent necessary, and solely in order, to offer to dispose of the investment to, or acquire the investment from, the person receiving the information; and2

    3. (c)

      it is reasonable for A to make the disclosure to enable him to perform the proper functions of his employment, profession or duties.2

MAR 1.4.5AG

2 MAR 1.4.5 E (3) is intended only to apply to an actual offer of the investment. It is not intended to apply to a disclosure of trading information to gauge potential interest in the investments to be offered or to help establish the likely price that will be obtained.

Examples of market abuse (improper disclosure)

MAR 1.4.6GRP

The following is an exampleof market abuse (improper disclosure):

X, a director at B PLC has lunch with a friend, Y, who has no connection with B PLC or its advisers. X tells Y that his company has received a takeover offer that is at a premium to the current share price at which it is trading.

MAR 1.4.7G

The following is an example of encouraging another to engage in market abuse (improper disclosure):

X, an analyst employed by an investment bank, telephones the finance director at B PLC and presses for details of the profit and loss account from the latest unpublished management accounts of B PLC.