Tackling market abuse: FSA prepares for introduction of new powers

Speaking at a conference on the new market abuse regime, Howard Davies, FSA Chairman, said:

"In just ten weeks time, the FSAs new Code of Market Conduct will come into effect. The new regime, designed to tackle abuse of the UKs financial markets, will at last go live after a four-year gestation.

"Firms need to ensure that key staff throughout the business are aware of the new obligations and of what will and will not be acceptable in the future.

"We are not out to trap the accidental offender: the aim is to outlaw insider trading and other clearly abusive practices. Research has shown that effective policing of insider trading reduces risk for investors and lowers the cost of capital for firms. So Londons markets will be stronger and healthier as a result."

The FSA has today announced the following initiatives:

• Publication of a factsheet setting out the key features of the new market abuse regime. This explains how the new Code of Market Conduct will work alongside the existing criminal law and Exchange rules and bring new levels of transparency by describing the standards that are expected of everyone who use UK financial markets, whether they are private investors or market professionals. The factsheet also carries a special e-mail address market.abuse@fsa.gov.uk - that has been set up to receive information from anyone about possible market abuse.

• The launch of a regular MarketWatch newsletter designed to develop a dialogue with the industry on market conduct issues. The primary aim of the newsletter is to update market participants on relevant market conduct issues as they arise. The first issue published today outlines the FSA proposals for giving firms guidance on the Code of Market Conduct. In particular, the FSA has established a central point of contact for any requests for guidance.

• The introduction of new pages on the FSA website pulling together in one place all market conduct material. The dedicated Market Conduct web pages contain contact details, links to all the relevant sections of the FSA Handbook of rules and guidance, the MarketWatch newsletter, and other relevant material.
  

Notes for editors

1. The factsheet and MarketWatch newsletter and Code of Market Conduct are all available from the Market Conduct web pages and can be viewed at www.fsa.gov.uk/marketconduct.

2. Howard Davies was speaking today at an FSA conference on the new market abuse regime, held at the QEII Conference Centre, Westminster and attended by 250 delegates.

3. The FSAs new powers to tackle market abuse are set out in the Financial Services and Markets Act 2000. There are three categories of market abuse:
   • Misuse of information for example, knowing of a forthcoming takeover and buying shares in the target company prior to general disclosure of that information;
   • Creating false or misleading impressions for example, posting on a bulletin board an inaccurate story that an important deal had been secured by a major company in order to give a false or misleading impression;
   • Market distortion for example, ramping the price of shares to a distorted level.

   For any behaviour to constitute "market abuse" it must also be regarded by a 'regular user' of that market as falling below the standards they would expect to see. The 'regular user' is someone who deals regularly and understands the workings of the market concerned and can be considered a close relative of the courts' "reasonable man", or the person on the Clapham Omnibus.

4. The FSA regulates the financial services industry and has four objectives under the Financial Services and Markets Act 2000: maintaining market confidence; promoting public understanding of the financial system; the protection of consumers; and fighting financial crime.

5. The FSA aims to maintain efficient, orderly and clean financial markets and help retail consumers achieve a fair deal.