On December 2, 2015 HM Treasury published a preliminary draft of the Financial Services and Markets Act 2000 (Market Abuse) Regulations 2016 (the draft Regulations). The draft Regulations propose a number of amendments to the Financial Services and Markets Act 2000 (FSMA), in part to provide some clarification on the implementation of the Market Abuse Regulation (MAR).
The draft Regulations propose the following:
- Clarification on the meaning of the term “persons closely associated”, as mentioned in Article 19(1) MAR.
- When a company delays disclosure of inside information under Article 17(4) MAR, it must provide a record of its written explanation of how the conditions set out in Article 17(4) were met to the Financial Conduct Authority (FCA) upon written request.
- Any application to the FCA under MAR must be made in such manner as the FCA may direct and contain, or be accompanied by, such other information as the FCA may reasonably require.
- Any notification to the FCA under MAR must be made in such manner as the FCA may direct.
Amendments to Part 6 of FSMA
These include the following:
- references to "disclosure rules" in section 73A are deleted;
- deletion of section 91(1ZA) (penalties for breach of Part 6 rules) which empowers the FCA to impose a penalty for contravention of the disclosure rules on an issuer, a person discharging managerial responsibilities (PDMR) within such an issuer or a person connected with a PDMR;
- deletion of section 96A (disclosure of information requirements);
- deletion of section 96B (persons responsible for compliance with disclosure rules, which includes the definition of PDMRs)
- deletion of Schedule 11B (connected persons);
- deletion of section 96C (suspension of trading);
- deletion of the definitions of "disclosure rules" and "inside information" from section 103(1) (definitions);
- section 102A(4) (meaning of "financial instrument") has been substituted with a new sub-section (4) that cross references the definition of "financial instrument" in the markets in financial instruments directive (MIFID);
- in section 102B(5)(c) (meaning of "offer of transferable securities to the public" etc.), the reference to "a market prescribed by an order under section 130A(3)" has been replaced with a reference to "a prescribed market"; and
- the introduction of a new section 102(B)(5A) to give the Treasury power to make regulations to specify the markets which are prescribed markets for the purposes of sub-section (5)(c).
Amendments to Part 8 of FSMA
These include the following:
- deletion of sections 118 to 122 (which, among other things, define the offence of market abuse, the behaviours that constitute market abuse, what constitutes "an insider" and "inside information" for the purposes of Part 8, and the requirement for the FCA to produce a code giving guidance to those determining whether or not behaviour amounts to market abuse (the Code of Market Conduct);
- changing the title of Part 8 from "Penalties for market abuse" to "Provisions relating to market abuse";
- replacing section 123 (power to impose penalties in cases of market abuse) with a new section 123 on the FCA's power to impose penalties or issue censure for contravention of the provisions of MAR or contravention of the information requirements and other requirements of new sections 122A to 122C and 122G to 122I and new sections 123A and 123B;
- sections 122A, 122B and 122C are to be added, giving the FCA various powers to require information from issuers, PDMRs and persons closely associated with PDMRs for the purpose of protecting investors, the orderly functioning of the markets and to exercise its functions under MAR;
- the addition of section 122D which provides for the entry of premises under warrant for the purpose of enforcing the information requirements and section 122F which sets out the offences for failure to comply with the information requirements under sections 122B or 122C and for providing false or misleading information under those requirements; and
- the addition of a number of other administrative powers for the FCA (set out in new sections 122G to 122I), including: the power to require an issuer to publish specific information or a specific statement where it considers this necessary to protect investors or for the orderly functioning of the markets; the power, subject to certain conditions, to require publication of a corrective statement, correcting false or misleading information made public, or a false or misleading impression given to the public, by a person; and the power to suspend trading in financial instruments in certain circumstances.
The draft Regulations propose to amend section 139A(4) FSMA (power of the FCA to give guidance), to extend this to also refer to MAR or any directly applicable EU regulation made under MAR.
The draft Regulations also provide some minor proposed amendments to the Criminal Justice Act 1993 and the Financial Services Act 2012, and revoke the Financial Services and Markets Act 2000 (Prescribed Markets and Qualifying Instruments) Order 2001.
HM Treasury requests any comment on the draft Regulations by February 4, 2016. The draft Regulations are not available online but are being provided by HM Treasury on request.