Market abuse

Question 1

What are the three insider dealing offences?

Answer 1

Section 52 of CJA 1993 sets out the three insider dealing offences:

• dealing in price-affected securities on the basis of inside information;
• encouraging another person to deal in price-affected securities on the basis of inside information; and
• disclosing inside information.

Question 2

When will a person have information as an insider?

Answer 2

Section 57(1) provides that a person has information as an insider if and only if:

• it is, and they know that it is, inside information; and
• they have it, and know that they have it, from an inside source.

Question 3

What is inside information?

Answer 3

Section 56(1) provides that ‘inside information’ is information which:

• relates to particular securities, to a particular issuer of securities or to particular issuers of securities – not to securities generally or to issuers of securities generally;
• is specific or precise;
• has not been made public; and
• if it were made public would be likely to have a significant effect on the price of any securities.

Question 4

Who is an insider?

Answer 4

Section 57(1) provides that a person has information from an inside source if and only if they have it through:

(a) being a director, employee or shareholder of an issuer of securities;

(b) having access to the information by virtue of their employment, office, or profession; or

(c) the direct or indirect source of the information is a person within (a).

Question 5

What piece of legislation aims to combat market abuse?

Answer 5

The piece of legislation that seeks to combat market abuse is the UK Market Abuse Regulation, which is the onshored version of the 2014 EU Market Abuse Regulation (596/2014/EU) (MAR).

Question 6

Which body is responsible for enforcing the UK rules relating to market abuse?

Answer 6

In the UK, the competent responsible for enforcing the market abuse rules is the Financial Conduct Authority.

Question 7

What sanctions can be imposed upon a person who has engaged in market abuse?

Answer 7

Where a person (P) engages in prohibited insider dealing or prohibited market manipulation, then FSMA 2000 empowers the FCA to impose a range of sanctions upon that person, including:

• imposing upon P a penalty of such amount as the FCA considers appropriate (s. 123(1) and (2)) or, instead of
  imposing a penalty, publishing a statement censuring P (s. 123(3));
• temporarily or permanently prohibiting P from holding certain positions, such as an office or position involving
  responsibility for taking decisions about the management of an investment firm (s. 123A(2)(a));
• temporarily prohibiting P from acquiring or disposing of financial instruments (s. 123A(2)(b));
• suspending, for such period as the FCA considers appropriate (up to a maximum of 12 months), any permission which P has to carry on a regulated activity (s. 123B(2)(a) and (4));
• imposing, for such period as the FCA considers appropriate (up to a maximum of 12 months), such limitations or
  other restrictions in relation to the carrying on of a regulated activity by the person as the FCA considers appropriate
  (s. 123B(2)(b) and (4)).