The EU market abuse regulation, where does it leave us?

Abstract

PurposeThe purpose of this paper is to provide an analysis of the market abuse regulation to determine whether the general assumption that it has made little difference to the pre-existing UK law on market abuse is accurate. In particular, the potential impact on compliance and behaviour in financial services firms and those who potentially receive inside information is considered.Design/methodology/approachThe methodology adopted is a combination of critical analysis and black letter law utilised to determine the content and potential impact of the market abuse regulation. A process of discovery made more important by the limited assistance given by the European Securities and Markets Authority and the Financial Conduct Authority in terms of the guidance and definitions they have provided.FindingsThe new Regulation has a wider definition of insider dealing than under the previous law, has a wider application in terms of the financial instruments that it applies to, has triggered significant new compliance and disclosure requirements and it also extends the law to new markets.Research limitations/implicationsThere are limitations in that the relevant regulatory bodies, ESMA and the FCA have made little effort to clarify how they interpret the new Regulation. This is a serious problem because in the case of the FCA, their view will impact on the approach they will take in future enforcement actions.Practical implicationsThis paper provides the first real analysis of the market abuse regulation’s effect and shows that, if carefully analysed in context, it has a significant impact on firms in the financial services sector and those engaged in activities which can put them in receipt of inside information. It will cause an increase in relevant compliance and has significant cost implications for affected firms.Social implicationsThis is not really relevant here. There will be necessary changes to compliance procedures.Originality/valueThe originality stems from the fact that there appears to be little else published which has engaged in a sustained analysis of the impact and effect of the EU market abuse regulation on the UK’s financial markets and those other firms who receive inside information.