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MAR 1.9 Market abuse (misleading behaviour) & market abuse (distortion)

MAR 1.9.1E

Table: section 118(8) of the Act:

"The seventh [type of behaviour] is where the [behaviour] (not [amounting to market abuse (manipulating transactions), market abuse (manipulating devices), or market abuse (dissemination)])

(a)

is likely to give, a [regular user] of the market a false or misleading impression as to the supply of, demand for or price or value of, [qualifying investments] [market abuse (misleading behaviour)]; or

(b)

would be, or would be to likely to be, regarded by a [regular user] of the market as [behaviour] that would distort, or would be likely to distort, the market in such an investment [market abuse (distortion)]

and ... is 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 his position in relation to the market

Descriptions of behaviour that amount to market abuse (misleading behaviour) under section 118(8)(a) or market abuse (distortion) under section 118(8)(b)

MAR 1.9.2G

The following behaviours are, in the opinion of the FSA , market abuse (misleading behaviour) if they give, or are likely to give, a regular user of the market a false or misleading impression:

  1. (1)

    the movement of physical commodity stocks, which might create a misleading impression as to the supply of, or demand for, or price or value of, a commodity or the deliverable into a commodity futures contract; and

  2. (2)

    the movement of an empty cargo ship, which might create a false or misleading impression as to the supply of, or the demand for, or the price or value of a commodity or the deliverable into a commodity futures contract.

MAR 1.9.2AE

5Failure by a person to give adequate disclosure that he has reached or exceeded a disclosable short position where:

  1. (1)

    that position relates, directly or indirectly, to securities which are the subject of a rights issue; and

  2. (2)

    the disclosable short position is reached or exceeded during a rights issue period;

is behaviour which, in the opinion of the FSA, is market abuse (misleading behaviour).

MAR 1.9.2BR

5For the purposes of MAR 1.9.2A E, "adequate disclosure" means disclosure made on a RIS by no later than 3.30pm on the business day following the date on which the disclosable short position is reached or exceeded. The disclosure must include the name of the person who has the disclosable short position, the disclosable short position and the name of the issuer of the qualifying instruments.

Short selling in relation to financial sector companies

MAR 1.9.2CE
  1. (1)

    6

    8

    [deleted]8

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  2. (2)

    [deleted]8

    8
  3. (3)

    [deleted]8

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  4. (4)

    [deleted]8

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MAR 1.9.2DE
  1. (1)

    6Failure by a person who has a disclosable short position in a UK financial sector company to provide adequate ongoing disclosure of their position is behaviour which, in the opinion of the FSA, is market abuse (misleading behaviour).

  2. (2)

    In (1), "adequate ongoing disclosure" means disclosure made on a RIS by no later than 3.30pm on the business day followingthe day on which the position reaches, exceeds or falls below a disclosable short position of 0.25%, 0.35%, 0.45% and 0.55% of the issued share capital of the company and each 0.1% threshold thereafter.8

    878
    1. (a)

      [deleted]8

      8
    2. (b)

      [deleted]8

      8
    8
  3. (2A)

    The disclosure referred to in (1)8must include the name of the person who has the position, the amount of the disclosable short position and the name of the company in relation to which it has that position.8

  4. (3)

    For the avoidance of doubt, changes in a disclosable short position between the thresholds referred to in (2) do not need to be disclosed under this section. For example, an increase from 0.25% to 0.31% of the issued share capital of the company does not need to be disclosed.8

    8
  5. (4)

    For the avoidance of doubt, (1) applies during a rights issue period.8

    8
  6. (5)

    This provision ceases to have effect on 30 June 2009.8

MAR 1.9.2EG

[deleted]8

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MAR 1.9.3C

[deleted]4

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Factors to be taken into account: false or misleading impressions

MAR 1.9.4E

In the opinion of the FSA , the following factors are to be taken into account in determining whether or not behaviour is likely to give a regular user a false or misleading impression as to the supply of or the demand for or as to the price or value of one or more qualifying investments or related investments:

  1. (1)

    the experience and knowledge of the users of the market in question;

  2. (2)

    the structure of the market, including its reporting, notification and transparency requirements;

  3. (3)

    the legal and regulatory requirements of the market concerned;

  4. (4)

    the identity and position of the person responsible for the behaviour which has been observed (if known); and

  5. (5)

    the extent and nature of the visibility or disclosure of the person's activity.

Factors to be taken into account: standards of behaviour

MAR 1.9.5E

In the opinion of the FSA , the following factors are to be taken into account in determining whether or not behaviour that creates a false or misleading impression as to, or distorts the market for, a qualifying investment , has also failed to meet the standard expected by a regular user:

  1. (1)

    if the transaction is pursuant to a prior legal or regulatory obligation owed to a third party;

  2. (2)

    if the transaction is executed in a way which takes into account the need for the market as a whole to operate fairly and efficiently; or

  3. (3)

    the characteristics of the market in question, including the users and applicable rules and codes of conduct (including, if relevant, any statutory or regulatory obligation to disclose a holding or position, such as under DTR 5 ;

    3
  4. (4)

    the position of the person in question and the standards reasonably to be expected of him in light of his experience, skill and knowledge;

  5. (5)

    if the transaction complied with the rules of the relevant prescribed markets about how transactions are to be executed in a proper way (for example, rules on reporting and executing cross-transactions); and

  6. (6)

    if an organisation has created a false or misleading impression, whether the individuals responsible could only know they were likely to create a false or misleading impression if they had access to other information that was being held behind a Chinese wall or similarly effective arrangements.