September 2016

LEAGAL EASE: The implications of the UK market abuse regime for market participants

The market abuse regime in Europe has changed. On July 3, the Market Abuse Regulation (MAR) took direct effect in every EU Member State, bringing in changes relating to insider dealing, market manipulation, recipients of market soundings, suspicious order and transaction reporting, and investment recommendations, imposing additional obligations and requirements on issuers, and the managers of issuers, with shares and other financial instruments traded on European markets. Significantly, the new regime goes beyond the scope of its predecessor, extending to all financial instruments admitted to trading on EU multilateral and organised trading facilities. Unfortunately, this broad-brush approach has the negative effect of making it difficult for market participants to identify whether a particular financial instrument is within the scope of the regulation. Indeed, MAR provides that Esma must compile a centralised list of financial instruments that are admitted to trading but makes clear that the regime applies to financial instruments regardless of whether they are included in Esma’s list; it will not be possible to use Esma’s list for a definitive indication of whether or not any particular financial instrument falls within the scope of MAR. Importantly, MAR applies to persons wherever located in relation to behaviour concerning financial instruments that are admitted to trading on an EU trading venue. Market participants based outside the UK and EU will need to be alert to the extraterritorial application of MAR. GUILTY TILL PROVEN INNOCENT?
Under the new regime, national competent authorities can establish ‘accepted market practices’ that allow market participants to carry out certain types of behaviour when dealing in financial markets that are customary for a particular national market, even though such activities may potentially constitute market abuse in another national market. What is an accepted practice in one particular market may not be an accepted practice in another. Market participants should therefore pay close attention to the type of activities they wish to carry out in each trading venue they wish to operate in.
The introduction of the market soundings regime allows issuers, secondary offerors, emission allowance market participants and any party acting on behalf of the above to disclose inside information to potential investors to gauge interest in a transaction. Disclosing parties and recipients must ensure all such information is made and received in compliance with the provisions of MAR.
MAR establishes a new obligation regarding suspicious transactions and orders. Under MAR, all persons who professionally arrange or execute transactions are required to maintain effective systems and procedures to detect and report suspicious transactions and orders and cancellations that could constitute insider dealing, market manipulation, attempted insider dealing, or attempted market manipulation to the trading venue’s regulator without delay.
The UK government and the FCA believe in tough market regulation. Following any Brexit, market abuse will, in our view, not likely be a target for deregulation, not least because MAR and its predecessor are the offspring of the UK civil market abuse regime introduced in 2000. In sum, firms must consider their potential obligations and ensure their systems and controls and training programmes protect against breach of the expanded regime. William Yonge is partner at Morgan Lewis ©2016 funds europe

Sponsored Profiles

SPONSORED FEATURE: Investing for income

May 17, 2017

Portfolio Manager Thomas Kruse examines the findings from Pioneer Investments’ survey on income investing and outlines ways of achieving a target income.

SPONSORED ARTICLE: A radical solution to KYC concerns

May 17, 2017

The 1MDB affair shows that lax know-your-customer and due-diligence procedures are a major risk, says Paolo Brignardello, head of product management and marketing, Fundsquare. New solutions are...

SPONSORED FEATURE: AIFMD - What does Brexit mean?

Apr 18, 2017

An open discussion between funds industry experts and initiated by SGG Luxembourg took place in London to examine  the implications of Brexit for UK fund managers marketing to the EU.

SPONSORED FEATURE: Luxembourg fund reporting – CRS vs FATCA

Apr 18, 2017

Luxembourg funds need clear procedures for CRS compliance, writes Andrew Knight, Partner at M Partners, a member of the Maitland network of law firms.

Executive Interviews

INTERVIEW: Finding managers that can (and do)

Apr 18, 2017

Fabrice Kremer, a fund selector at Banque de Luxembourg Investments, has berated fundamental managers for failing to beat indices, but he remains committed to active funds. He speaks to Nick...

JERSEY INTERVIEW: ‘A steady sort of place’

Mar 21, 2017

The chief executive of Jersey Finance is keen to portray the island as a stable, trustworthy jurisdiction. He talks to George Mitton.



May 17, 2017

With such an intangible product, it can be hard for asset managers to communicate what they do. Having personality and connecting with customer aspirations may be the key, our branding roundtable hears.

ROUNDTABLE: The issue is perception

Mar 21, 2017

Our panel discuss tax transparency, the elegance of private placement and why Jersey could do more to promote itself. Chaired by Tom Cowsill in Saint Helier.