The Directive, a key element of the EU Financial Services Action Plan, introduces a common EU approach for preventing and detecting market abuse and ensuring a proper flow of information to the market.
Hector Sants, Managing Director of the FSA's Wholesale Business Unit, said: "The FSA has sought to ensure that the flexibility of the current market abuse regime is retained. Those activities which are offences under the current regime will continue to be offences following the Directive's implementation
"We have worked closely with the industry on the implications of the Directive and while fully implementing the Directive's requirements have also taken the opportunity to shorten and simplify the sections of our the FSA
Handbook on market abuse.
"We are confident that our approach to implementation will ensure that UK financial markets retain their deserved and hard won reputations for being orderly and fair."
The FSA's approach to implementation
In implementing the Directive, the FSA has aimed to retain the breadth of the current regime as it exists in the UK - in terms of the market abuse offences and the markets covered by the regime - while incorporating the specific Directive offences, namely insider dealing and manipulation.
As well as defining market abuse, the Directive includes new measures to help detect
market abuse and prevent it from happening. These include:
• Insiders' Lists - issuers and their advisers are required to keep lists of persons who have access to inside information.
• Disclosure of managers' deals - persons discharging managerial responsibility on behalf of an issuer will be required to disclose details of their personal deals in the shares of the issuer and any related derivatives. This is an extension of the current UK regime, which focuses on disclosure of directors'
Suspicious Transactions Reporting - firms arranging transactions must report those transactions to the FSA where there is a reasonable suspicion that market abuse might have taken place.
• Research Disclosures – firms producing research will have to disclose information about research sources and methods, and also conflicts of interest that may impact on the impartiality of the research.
The UK's market abuse regime will continue to apply to all markets that are currently prescribed under the Financial Services and Markets Act, including the UK's commodity derivatives markets. It will also apply to all financial instruments
admitted to trading on a regulated market including OTC trading in these instruments.
The new regime will also include Directive definitions of market abuse offences that differ slightly from the current regime definitions but will not affect their scope and
application. These changes include:
• Misuse of Inside Information – the directive offence defines this as the misuse of information that is "precise, non-public and likely to have a significant impact on the price of a financial instrument." The current offence of misuse of "relevant information not generally available" (RINGA), will be retained to
avoid any narrowing of the current market abuse regime.
• Market Manipulation – specific Directive offences of market manipulation will be introduced, replacing the current offences of false and misleading information and market distortion. The FSA will retain an additional offence of more general behaviour that amounts to market manipulation.
• Disclosure of Inside Information - issuers must disclose inside information as soon as possible, replacing the current Chapter 9 obligations under the Listing Rules.