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Chapter 12

Market abuse

Civil offence

The Financial Services and Markets Act 2000 introduces concept of market abuse.

Under s118 (1) market abuse is defined as:

 behaviour in relation to any qualifying investments;

 likely to be regarded by regular users of the market as falling below the
standard reasonably expected of a person in that position; and

 that falls within at least one of three categories:

1 Based on information not generally available to users of the market which,
if available to a regular user, would be likely to be regarded by him as
relevant in regard to the terms on which to deal in those investments.

2 Is likely to give a regular user a false or misleading impression as to the
market value of such investments.

3 Is regarded by a regular user as likely to distort the market in such
investments.

Qualifying investments are those which are traded on the UK's 'prescribed markets',
as well as those traded on other European regulated markets.

The Financial Conduct Authority have also drawn up a Code of Market Conduct to
detail the ways in which market abuse can occur.

There are seven types of behaviour which can amount to market abuse.

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