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Market Abuse 1) Rationale a. Shoring up investor confidence and reimposing market stability in the UK are seen as critically important in avoiding even worse finance and economic problems. This catches abusers who have avoid punishment for criminal offences 2) Offences a. Primary Offence a.i. 118(1) Market abuse is behaviour which occurs in relation to qualifying investments admitted to trading, or an application for admission has been made, on a prescribed market and falls within any one or more of the types of behaviour set out in 118(2)-(8) b. Secondary Offence b.i. 123(1)(b) FSMA Penalties can be imposed on a person if, by taking or refraining from taking action, he 'requires or encourages' another person to engage in behaviour which, if engaged in by the first person, would amount to market abuse 3) Who could be liable?
a. Market abuser is an insider as defined in 118B FSMA a.i. 118B an insider is a person who has inside information a.i.1. 118B(a) As a result of his membership of an administrative, management or supervisory body of an issuer of qualifying investments a.i.2. 118B(b) As a result of his holding in the capital of an issuer of qualifying investments a.i.3. 118B(c) As a result of having access to the information through the exercise of his employment, profession or duties a.i.4. 118B(d) As a result of his criminal activities a.i.5. 118B(e) Which he has obtained by other means and which he knows or could reasonably be expected to know is inside information a.i.5.a. 118C inside information is a.i.5.a.i. 118C(2) information of a precise nature as defined in 118C(5) a.i.5.a.i.1. 118C(5)(a) circumstances exists or may reasonably be expected to come into existent or an event has occurred AND a.i.5.a.i.2. 118C(5)(b) is specific enough to have an effect on the price of qualifying investments a.i.5.a.i.2.a. Ordinary shares are qualifying investments a.i.5.a.ii. 118C(2)(a) not generally available a.i.5.a.ii.1. 118C(8) information which cannot be obtained by research or analysis a.i.5.a.iii. 118C(2)(b) relates directly or indirectly to the issuer of a financial instrument a.i.5.a.iii.1. Section C, Annex 1 MiFID a financial instrument covers ordinary shares a.i.5.a.iv. 118C(2)(c) would, if generally available be likely to have a significant effect on the price of the company's shares a.i.5.a.iv.1. 118C(6) information of a kind which a reasonable investor would be likely to use as part of the basis of his investment decisions b. 118A(1) behaviour of the market abuser must occur in the UK or in relation to qualifying investments trading on a prescribed market in the UK 4) Is there a qualifying investment?
a. 130A(1)(b) Treasury may specify by order what qualifying investments are a.i. PMQI Order 2001 refers to the definition of 'financial instrument' in Art 1(3) MAD (Market Abuse Directive) a.i.1. Shares & bonds are qualifying investments 5) Is the qualifying investment traded on a prescribed market?
a. 130A(1)(a) Treasury may specify by order what prescribed markets are
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