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Market Abuse
Market abuse and accepted market practices
MAD is intended to guarantee the integrity of European financial markets and increase investor confidence. Any unlawful behavior in the financial markets is prohibited. The concept of market abuse typically consists of insider dealing, unlawful disclosure of inside information, and market manipulation.
Directive 2003/6/EC of the European Parliament and of the Council (MAD) was published in the Official Journal and entered into force on 12 April 2003.
Its objective is to create a level playing field for all economic operators in the Member States as part of the effort to combat market abuse by:
Regulation No 596/2014 on market abuse (MAR), repealing Directive 2003/6/EC of the European Parliament and of the Council and Commission Directives 2003/124/EC, 2003/125/EC and 2004/72/EC and Directive 2014/57/EU on criminal sanctions for market abuse (CS MAD) were published in the Official Journal of the European Union on 12 June 2014 and will apply as of 3 July 2016.
Focus
MAR aims at enhancing market integrity and investor protection. To this end MAR updates and strengthened the existing MAD framework by extending its scope to new markets and trading strategies and by introducing new requirements.
The definition of financial instruments in MAR refers to the meaning of this concept under the 2014/65/EU (MIFID II), which is very broad. On top of that, MAR does not limit its scope of application to financial instruments admitted to trading on a regulated market or for which a request for admission to trading on a regulated market has been made. MAR covers financial instruments admitted to trading or traded on Multilateral Trading Facilities (MTF), financial instruments traded on Organised Trading Facility (OTF) and emission allowances.
However, some exceptions apply. The prohibition of insider dealing and market manipulation does not apply to trading in own shares in buy-back programs or trading in securities for the stabilization of securities when some conditions laid down in MAR are met. Moreover, MAR does not apply to public authorities in pursuit of monetary, exchange rate or public debt management policy. Other specific exceptions apply in the framework of the EU’s climate policy or the EU’s Agricultural Policy for instance.
MAR provides a defense if the transaction was legitimate and in accordance with market practices accepted by the competent authority – these are referred to as ‘Accepted Market Practices’ (AMPs). The Regulation describes the non-exhaustive factors that a competent authority should take into account before deciding whether or not to accept a market practice.
The competent authority must in particular consult as appropriate relevant bodies such as representatives of issuers, financial services providers, consumers, other authorities, market operators and ESMA, before officially accepting an AMP.
MAR provides for a minimum set of supervisory and investigatory powers which the national competent authorities should be entrusted with under national law. Those include, among others: (i) the access to any document or data and the right to receive or take a copy thereof; (ii) the right to carry out on-site inspections or to require recordings or data traffic held by investment firms, credit institutions or financial institutions and, insofar permitted by national law, by telecommunications operators; and (iii) the power to impose a temporary prohibition of the exercise of professional activity.
The swift cooperation between the NCAs is ensured by a clear duty to cooperate set forth in MAR. The cooperation with third countries shall take place within the framework of specific cooperation arrangements to be entered into with the relevant supervisory authorities.
Without prejudice to the criminal sanctions laid down in CS MAD, MAR provides for a set of administrative sanctions and other administrative measures.
CS MAD complements MAR by requiring all Member States to provide for harmonised criminal offences of insider dealing and market manipulation, and to impose criminal terms of imprisonment of at least two to four years, depending on the relevant offence.
ESMA’s role
MAR empowers ESMA to develop draft regulatory technical standards (RTS) and implementing technical standards (ITS). ESMA delivered a first set of technical standards on 28 September 2015, on the following items:
Pursuant to MAR, ESMA received two formal requests (mandates) from the European Commission to provide technical advice to assist the European Commission on the possible content of the delegated acts required by some provisions of the MAR. ESMA was required to provide technical advice by no later than eight months after the entry into force of MAR.
The first mandate was published on 21 October 2013, and it covers the following topics:
The second mandate was published on 2 June 2014, and refers only to the specification of procedures to enable reporting of actual or potential infringements of MAR.
ESMA published its technical advice related to those mandates on 3 February 2015.
Under Articles 7(5), 11(11) and 17(11) ESMA issues guidelines on:
for persons receiving market sounding: the factors for them to assess whether the information amounts to inside information, the steps to take if inside information has been disclosed to them in order to comply with MAR provisions on inside information and the records to maintain in order to demonstrate such compliance, or delayis in disclosure of inside information; and
delays in the disclosure of inside information.
According to MAR ESMA should publish:
In relation to AMPs, under MAR within two months following receipt of the notification, ESMA will issue an opinion assessing the compatibility of the AMP which MAR and whether it would not threaten the market confidence in the European Union’s financial market. The opinion shall be published. ESMA shall also publish the list of the AMPs established and the Members States in which they are applicable.
These AMPs can be found in the ESMA Library.
Market abuse
Certain types of behaviour, such as insider dealing and market manipulation, can amount to market abuse. Firms must have safeguards in place to identify and reduce the risk of market abuse and other financial crime.
Preventing, detecting and punishing market abuse is a high priority for us. It’s important in fulfilling our statutory objectives of protecting consumers, enhancing market integrity and promoting competition.
We work closely with the financial services industry, law enforcement agencies and other regulators to combat market abuse and other related financial crime. We also aim to educate market participants.
Market Abuse Regulation (MAR)
The EU Market Abuse Regulation (EU MAR) came into effect on 3 July 2016 and was onshored into UK law on 31 December 2020 by the EU (Withdrawal) Act 2018.
Changes to the regulation were made by the Market Abuse Exit Regulations 2019, to make sure that the onshored legislation (UK MAR) operates effectively in the UK.
The EU implementing measures for MAR were also onshored into UK law on 31 December by the EU (Withdrawal) Act 2018 and were amended by FCA 2019/45.
Changes to our Handbook were made by FCA 2019/23 in relation to the Market Conduct sourcebook, and by FCA 2019/26 in relation to the Disclosure Guidance and Transparency Rules sourcebook.
Market abuse offences
UK MAR makes insider dealing, unlawful disclosure, market manipulation and attempted manipulation civil offences, and gives us powers and responsibilities for preventing and detecting market abuse.
Criminal insider dealing is an offence under Part V of the Criminal Justice Act 1993, and criminal market manipulation is an offence under sections 89-91 of the Financial Services Act 2012.
Prevention and detection
We work closely with the financial services industry to identify and prevent market abuse. We also undertake our own surveillance of financial markets and have systems for identifying insider dealing and market manipulation in various financial markets. This includes analysing transaction reporting data, order book data, benchmark submission and other market data. This significantly helps us in detecting market abuse.
Our market monitoring department is also in regular contact with trading firms, market operators and investors to identify suspicious trading.
Operators of UK trading venues must detect and report suspicious transactions and orders to us via suspicious transaction and order reports (STORs).
Persons professionally arranging or executing transactions must also detect and report suspicious transactions and orders. Such persons are required to report STORs to us where they are registered or have their head office in the UK or, in the case of a branch, where the branch is situated in the UK.
Enforcement and penalties
We take enforcement action against market abuse and can impose significant penalties.
For breaches of UK MAR we can impose unlimited fines, order injunctions, or prohibit regulated firms or approved persons.
Criminal sanctions for insider dealing and market manipulation can incur custodial sentences of up to 7 years and unlimited fines.
See our list of final notices and related press releases for more on the action we have taken over market abuse.
Report market abuse or contact us
Find out how to report suspected market abuse as a firm or trading venue subject to the requirements of Article 16 of UK MAR.
Reporting requirements
Under UK MAR, firms, issuers and individuals (as applicable) must make the following notifications to us when required:
Responding to requests for insider lists
The following entities must transmit their insider lists to us on request:
We have a secure system for transmission that will enable issuers or their nominees to respond to requests for insider lists using a secure electronic system.
This system is free to use and gives sufficient security to protect the personal data in insider lists. Details of the transmission method will be provided to issuers or their nominees, and EAMPs as part of any information request we make.
Market Watch
Our Market Watch newsletter looks at market abuse risks, transaction reporting, suspicious transaction and order reporting, and other market conduct issues.
It can help regulated firms and other non-regulated market users to understand more about these areas and relevant practices to consider.
Market Abuse Regulation (MAR)
We have compiled key information on fulfilling the Market Abuse Regulation (EU 596/2014).
What is the Market Abuse Regulation (MAR) and who is affected?
MAR was created by the European Union to keep pace with financial market developments, to create capital markets transparency and to protect investors within all member states.
Derivatives which are being traded on these trade venues are also subject to MAR.
Tightening of Disclosure Requirements Under MAR
Disclosure of Inside Information (particularly Art. 17 MAR)
Under MAR, disclosure of inside information becomes a legal requirement for issuers of all financial instruments covered by MAR. In the past, this requirement was limited to regulated markets. Now, issuers must disclose inside information and distribute it throughout Europe to regulatory bodies. This must then be available on the issuer’s website for 5 years. In addition, this information must be sent to the national financial authority (e.g. the BaFin), and in some cases, to the trading venue and to the national Officially Appointed Mechanism (e.g. Unternehmensregister).
Managers’ Transactions (particularly Art. 19 MAR)
Persons Discharging Managerial Responsibilities (PDMR) and individuals closely associated with them (e.g. spouses) must notify the issuer of relevant personal transactions they undertake involving the issuer’s financial instruments. The obligation to disclose Managers‘ Transactions is now extended to financial instruments traded on OTC. It is key to note a reduced notification period of three business days. This disclosure requirement also affects trading with derivatives and debt securities. An announcement by the issuer must be distributed throughout Europe, sent to the relevant financial authority, and also stored in the OAM (Officially Appointed Mechanism). Managers’ Transactions announcements must now also contain the Legal Entity Identifier (LEI code) of the issuer. In addition, issuers must compile a list of all persons bound by Directors’ Dealings (including closely-associated persons).
New Regulations for the Management of Insider Lists
Issuers and everyone acting on their behalf (e.g. law firms) must draw up insider lists. The lists must include every person who has temporary or permanent access to inside information. This list must be continually updated and insiders must be officially informed of their obligations.
Increased Sanctions Under MAR
In addition to new obligations, sanctions and penalties have increased under MAR. For example, market manipulation is no longer considered the only criminal offence. Simply attempting a market manipulation is now also considered a crime. Sanctions for violating disclosure requirements and insider laws have also been tightened considerably.
MAR non-compliance also results in the regulator “naming and shaming”: in the future, all sanctions, the type of offence committed, as well as the identity of the person in question, will be published on the website of the responsible national authority for 5 years.
Market Abuse Regulation
The Market Abuse Regulation (MAR) aims to increase market integrity and investor protection. Find out more about the application and structure of the MAR, market abuse offences and exemptions.
Key onshoring changes to MAR
The main changes to UK MAR are to notifications for delaying the disclosure of inside information, notifications for transactions of persons discharging managerial responsibilities (PDMRs), and the reporting of STORs.
Read more about these changes in our Primary Market Bulletin 32 and the temporary transitional power (TTP) key requirements. The bulletin also includes information on reporting requirements relating to exemptions for buy-back and stabilisation transactions.
The EU Market Abuse Regulation (EU MAR) came into effect on 3 July 2016 and was onshored into UK law on 31 December 2020 by the European Union (Withdrawal) Act 2018. Changes to EU MAR were made by the Market Abuse Exit Regulations 2019, to make sure that the onshored legislation (UK MAR) operates effectively in the UK.
The EU implementing measures for EU MAR were also onshored into UK law on 31 December 2020 by the EU (Withdrawal) Act 2018 and were amended by FCA 2019/45.
Changes to our Handbook were made by FCA 2019/23 in relation to the Market Conduct Sourcebook, and by FCA 2019/26 in relation to the Disclosure Guidance and Transparency Rules sourcebook.
UK MAR aims to increase market integrity and investor protection, enhancing the attractiveness of securities markets for capital raising.
It contains prohibitions of insider dealing, unlawful disclosure of inside information and market manipulation, and provisions to prevent and detect these.
This page is designed to assist readers of our Handbook. It should not be regarded as an exhaustive list of relevant information sources. Firms, issuers and individuals in scope of UK MAR should review all the regulation and make sure they’re in compliance with all relevant provisions.
Application of UK MAR
Structure of UK MAR
UK MAR includes the following legislation, technical standards, and guidance:
ESMA Guidelines
ESMA Guidelines and Recommendations have not been incorporated into UK law. However, we expect firms and market participants to continue to apply Guidelines that existed before the end of the transition period, where relevant, as they did before the end of the transition period.
These should be interpreted in light of the UK’s withdrawal from the EU, including the associated legislative changes that are being made to make sure the regulatory framework operates appropriately.
We shall also continue to apply such Guidelines and Recommendations in respect of our own functions in the same manner as before, interpreting them in light of the UK’s withdrawal from the EU. The following guidelines are mandated under EU MAR:
These guidelines set out a non-exhaustive indicative list of information which is reasonably expected or required to be disclosed on relevant commodity derivative and spot markets (and could therefore fall within the definition of inside information for commodity derivatives).
These guidelines set out a non-exhaustive indicative list of legitimate interests of issuers, and of situations in which delayed disclosure of inside information is likely to mislead the public.
The guidelines detail the factors, steps and appropriate records a person must consider when information is disclosed as part of the sounding regime.
Market abuse offences
Inside information
UK MAR sets out a definition of ‘inside information’ for financial instruments.
UK MAR also sets out specific definitions for:
Insider dealing and unlawful disclosure
UK MAR sets out what constitutes insider dealing and the unlawful disclosure of inside information.
The use of inside information to amend or cancel an existing order constitutes insider dealing. UK MAR prohibits persons in possession of inside information from using that information to deal or attempt to deal in financial instruments or to recommend or induce another person to transact on the basis of inside information.
UK MAR sets out that unlawful disclosure of inside information is where a person possesses inside information and discloses that information to any other person, except where the disclosure is made in the normal exercise of employment, a profession, or duties.
Market soundings
UK MAR sets out a framework to make legitimate disclosures of inside information during market soundings. Provided certain requirements are met, disclosing market participants are protected from an allegation of unlawful disclosure of inside information.
Market manipulation
UK MAR defines and prohibits market manipulation. This offence captures attempted manipulation, benchmarks and, in some situations, spot commodity contracts.
Exemptions
Buy-back programmes and stabilisation measures
Providing certain requirements are met, trading in securities or associated instruments for the stabilisation of securities, or trading in own shares in buy-back programmes, are exempt from the prohibitions against market abuse.
For buy-back programmes, where the shares have been admitted to trading or are traded on a UK trading venue, issuers should report to us each transaction relating to the buy-back programme (including those transactions that do not take place on a UK trading venue). For buy-back programmes, where the shares have been admitted to trading or are traded on a EU trading venue, issuers should report to us or the relevant EU competent authority, depending on where the shares have been admitted to trading or are traded.
For stabilisations, where the securities are traded on a UK trading venue, issuers, offerors, or entities undertaking the stabilisation, should continue to report all stabilisation transactions to us (including those transactions that do not take place on a UK trading venue). Where the securities are traded on an EU trading venue, issuers, offerors, or entities undertaking the stabilisation, should continue to report to the EU competent authority of the trading venue in accordance with EU MAR.
We have the following templates that issuers or firms submitting on behalf of an issuer may use when notifying us:
You do not have to follow these templates.
Accepted market practices (AMPs)
The prohibition of market manipulation doesn’t apply to activities referred to in UK MAR Article 12(1)(a) provided that the person entering into a transaction, placing an order to trade, or engaging in any other behaviour establishes that such transaction, order or behaviour has been carried out for legitimate reasons, and conforms with an AMP.
We are able to establish an AMP, subject to certain criteria and conditions, in relation to the UK market. However, we have not currently established any such AMPs, and there are no EU AMPs that apply to UK markets.
Disclosures
Disclosure and delaying disclosure of inside information
The following entities are required under UK MAR to publicly disclose inside information which directly or indirectly concerns them as soon as possible, but can delay the disclosure if certain conditions are met:
Such issuers must notify us after delaying disclosure of inside information. They don’t need to provide a written explanation setting out how the relevant conditions for delaying disclosure were met, but should keep appropriate records in case we request this.
Where financial institutions and credit institutions intend to delay disclosure due to financial stability concerns, they must satisfy a number of conditions, including requesting and receiving our consent to delay to disclose. Financial institutions and credit institutions should call the emergency line on 020 7066 8354 for such delayed disclosures.
Insider lists
The following entities are required under UK MAR to maintain a list of all persons working for them that have access to inside information:
Such entities are required to transmit their insider lists to us on request.
Suspicious transaction and order reports (STORs)
UK trading venues must detect and report suspicious transactions and orders to us without delay via STORs.
Firms (and individuals) who are persons professionally arranging or executing transactions, must also detect and report suspicious transactions and orders to us without delay via STORs. Such persons are required to report STORs to us where they are registered or have their head office in the UK or, in the case of a branch, where the branch is situated in the UK. Find out how to submit a STOR.
Managers’ transactions
UK MAR Article 19 requires persons discharging managerial responsibilities within certain issuers (PDMRs), and persons closely associated with them (PCAs), to notify us and the issuer of relevant personal transactions they undertake in the issuer’s shares, debt instruments, derivatives, or other linked financial instruments, if the total amount of transactions per calendar year has reached €5,000.
The issuer in turn must make that information public within 3 business days.
This requirement applies to:
PDMRs and PCAs for those issuers above are only required to notify under Article 19 when they deal in shares or debt instruments of the issuer which are:
Dealing in instruments that do not fall into these categories does not need to be notified under Article 19.
The notification must be made promptly and no later than 3 business days after the transaction date.
PDMRs are also prohibited from conducting certain personal transactions during a closed period. The interpretation of the application of the closed periods around preliminary results is clarified in 7.9 of ESMA’s questions and answers on EU MAR. See the PDMR notification form and a guide to completing it.
Investment recommendations
Persons producing or providing investment recommendations must make sure information is objectively presented and disclose any conflicts of interest.
UK MAR and UK Emission Trading Scheme
The Treasury has announced plans to establish a UK Emission Trading Scheme (UK ETS) from 1 January 2021, and is introducing legislative changes to implement the UK ETS.
Initial changes to UK MAR were made by the Securities Financing Transactions, Securitisation and Miscellaneous Amendments (EU Exit) Regulations 2020. These regulations removed earlier onshoring changes set out in the Market Abuse Exit Regulations 2019, which are no longer relevant as a result of the UK establishing the UK ETS.
However, these initial changes don’t reflect the intended final scope of UK MAR on ETS matters. Forthcoming legislation will further amend UK MAR to finalise its scope and how it applies to the ETS.