The New European Union and United Kingdom Regimes for Regulation of Market Abuse

Abstract

The dust seems to have settled, on the debate on whether or not to regulate financial services. Discussions as to whether insider dealing is a bad practice and arguments that it may be a positive thing have considerably ceased as a consensus has arisen that it is a bad practice and must, therefore, be stopped. The Market Abuse Directive came into force 1 July 2005 and the Financial Services and Markets Act came into force in December 2001. This study seeks to trace the developments in the regulation of financial markets law in the EU and the UK. The paper will analyse the significant changes in the regulatory framework starting from 1980, when the UK first criminalised conduct that was considered to constitute an abuse of financial markets. This paper will consider the Companies Act 1980, the Company Securities (Insider Dealing) Act 1989, the Financial Services Act 1986, the Criminal Justice Act 1993 and the FSMA. With regards to EU law, this paper will delve into the provisions in the Insider Dealing Directive 1989, the Council of Europe's Convention against Insider Dealing 1989 and the Directive and its level 2 implementing Directives. This study also seeks to examine in detail whether the current laws in place are appropriate and effective in dealing with abuses in the financial markets. The principal subject of study is control of insider dealing. The study begins with a general analysis of regulation of financial services. The paper will address four key areas in the law of financial services regulation. These are: The definition of insider dealing; the definition of an insider; the definition of inside information, and permitted and prohibited transactions under successive regulatory regimes in the EU and UK.Although, inevitably the Directive and the FSMA are considered in some great detail, this paper does not seek to be a treatise on EU and UK law. It narrows down to specific provisions of the legislation on market abuse and does not consider regulation of financial markets in totality.The hallmark of the current law of regulation of financial markets is the importance that is attached to the use of civil measures to control misuse of confidential information. This is despite the fact that insider dealing remains a criminal offence across EU Member States and the UK.