The Regulation itself makes a number of predications, not all of them necessarily
consistent, stating that the purpose of the Regulation is to preserve market integrity, avoid
potential regulatory arbitrage, ensure legal accountability and provide for more legal
certainty and less regulatory complexity for market participants. It also provides for a
widening of the law to cover tradingfacilities which previously operated outside the law and
benchmarks. These are multilateral trading facilities (MTFs) and organised trading
facilities (OTFs) which are discussedbelow. In addition, OTC contracts which are only
traded privately are also intended to be included where market abuse could impact on the
contract. The time at which the law can have an impact is brought forward and now
activates at the pointat which an application to trade is made Pinsent Masons (2016).
This article seeks to analyse the issues arising from the new Regulation and the
uncertainty left by both partsof the wording and the unwillingness of ESMA7and the FCA
to provide clearer guidance. This will be done by examining the wording of the relevant
parts of the Regulation and the limited guidancethat has been provided on it. The impact on
research, managers’disclosure requirements, Chinese walls and investment advice are all
considered to the extent necessary to illuminate the position under the new Regulation.
Those cases and enforcement actions that assist in interpretation are also considered and
this article thus considers the content and effects of the Regulation and theimpact which it
has on those operating in the market place.
The new law is based on the deﬁnition of “ﬁnancial instrument”in the Markets in
Financial Instruments Directive II (MiFID II) which is wider than its predecessor (see
below), and there are also revisions to the stabilisation and buy back regulations.
Stabilisation must involve the price being kept between certain limits and must only be
carried out for a limited period of time, with disclosure of relevant information. Buy backs
must involve full details being disclosed priorto the start of trading, reports being made to
the relevant authority and with subsequent disclosure to the public. In addition, certain
types of high frequency trading and abusive algorithms are banned because of their
potential for abusing markets.
In terms of its content, the Regulation replacesthe pre-existing market abuse regime
in the UK which consisted of s. 118 and s.123 (1) Financial Services and Markets Act 2000
(FSMA) with the criminaloffences of insider dealing, unlawful disclosureand market
manipulation with regard to a “ﬁnancial instrument”. As mentioned, in some respects
the deﬁnition has a wider meaningthan under the preceding law and also has a wider scope,
but on the other hand, the “misleading statements”and “marketdistortion”elements of the
preceding law appear to have been repealed. This will be discussed later. The existing
criminal laws relating to insider dealing are still in place in the UK but in addition the
connected FCA rules have been replaced and changes made to the FCA rules at Chapters 2
and 3 together with the Disclosure and Transparency Rules and the amended Code of
Market Conduct (MAR). It should be added that issuers whose securities have been
admitted to trading on an MTF, but no other marketin the EU, without their consent are still
subject to the EU market abuse,insider dealing and market manipulation laws but not tothe
disclosure, insider lists and the directors’and senior ofﬁcers’transaction rules. Matters
become more complex if such an issuer then engages in own account dealing in relation to
the investments as the insiderdealing laws will potentially import.
The Regulation covers ﬁnancial instruments that are traded or for which a request to
trade has been made on an MTF, an OTF or a derivative wherethe price depends on one of
the above. Essentially, it extends the scope of the law in this area to new markets and
platforms and extends the range of behaviour caught by the law. In particular, it has
resulted in signiﬁcant new disclosure and compliance requirements. The Regulation also