Amendments to UK market abuse rules proposed to implement new EU regime

The FCA will make changes to its handbook to "provide guidance on, and signposts to" the EU's Market Abuse Regulation (MAR) before the new regime comes into force on 3 July 2016, according to a consultation document. However, information contained in the handbook should be treated as supplementary to the rules and "should not be regarded as the source of all provisions relating to market abuse".

The consultation closes on 4 February 2016. In particular, the FCA is seeking views on its approach to the new requirement to provide an explanation of the delay to the disclosure of inside information and the threshold for disclosure of managers' transactions, as these are the two areas in which it has the most discretion when implementing the new regime.

Financial regulation expert Michael Ruck of Pinsent Masons, the law firm behind Out-Law.com, said that the MAR would repeal the previous legal regime throughout the EU with effect from 3 July 2016.

"It should be noted that the previous Market Abuse Directive had to be implemented via UK legislation, via the Financial Services and Markets Act (FSMA) and FCA rules, whereas the MAR will have direct application in the UK," he said. "The FCA therefore has limited discretion in relation to its implementation. This is reflected in the consultation issued, in particular, in relation to the decision to delay public disclosure of inside information and the notification requirement applicable to transactions by managers."

"The consultation is really more of an explanation document than a consultation paper on various key issues. Whilst firms should respond to the consultation, the more interesting question for the FCA is around how it implements the market abuse regime and whether the EU regulation will lead to either thematic work or more enforcement action in this area," he said.

Once in force, the MAR will extend the market abuse regime across Europe to catch abuse that takes place on electronic trading platforms, and to clearly prohibit abuse strategies enacted through high frequency trading (HFT). It will also cover offences related to the manipulation of benchmarks, such as LIBOR and EURIBOR. Market abuse offences across the EU will come with a common set of criminal sanctions wherever they take place, including fines and prison sentences of at least four years for insider dealing, unlawful disclosure or market manipulation.

The EU's new approach to market abuse laws will mean that parts of the UK's Code of Market Conduct (CoMC) within the FCA Handbook and Model Code on Share Dealing, which is part of the Listing Rules, will no longer be fully compatible with the legal framework. As a result, the FCA has proposed replacing the Model Code, which restricts dealing a company's shares by its directors and senior employees, with guidance for firms to use when developing their processes to allow persons discharging managerial responsibilities (PDMRs) to apply for clearance to deal.

"It is helpful that the FCA recognises the major change this will represent to premium listed companies, advisers and investors," said share plans expert Suzannah Crookes of Pinsent Masons. "It is to be hoped that the guidance which is proposed will be useful to those stakeholders, at least during a transitional period, in supporting compliance with the new regime under the MAR."