Market Conduct Unbecoming

Everyone knows what insider dealing is. Or, at least they think they do. When it comes to market abuse, however, not quite so many people have the same confidence.

Market abuse is a relatively new offence, high up on the Financial Services Authority’s (the FSA) hit list.The FSA is increasingly looking at cases of it. Indeed, one has to look no further than the investigations into M&S share dealing and the recent case of “The Plumber” to realise the seriousness with which they are treating it.

Those that deal need to understand what market abuse is.The offence has a number of different aspects. In essence, it is an amalgam of other types of offences, such as market manipulation and insider dealing, but with certain differences. Crucial to an understanding of the way it works in practice is an understanding of the detailed Code of Market Conduct produced by the FSA. Key points include the fact that no intent to commit is necessary, and that the behaviour is measured against the standards to be expected by the notional regular user. To add to the complexity, both the underlying legislation and the FSA Rules are due to change shortly as a result of the Market Abuse Directive that has come out of Europe.The joint Treasury/FSA consultation has just closed and the amendments coming out of it are eagerly awaited by those in the industry.

Sometimes the worst happens and the FSA starts to ask questions about dealings it has concerns about.There are two fundamental issues that crop up for clients time and again in these circumstances. First, if the case relates to your own company, you will almost always be well advised to seek separate representation on your individual position. Second, take proper advice at an early stage, as it is the unguarded comments to the FSA in an atmosphere of informality that come back to haunt you.

If you would like further information, please contact:

Adam Epstein
Tel +44 (0)20 7440 7102
adam.epstein@mishcon.com