MAR 1.7 Statutory Exceptions

Behaviour will be regarded as conforming with an FSA rule only if it is required or expressly permitted by that rule. In order to fall within this safe harbour, there must be a specific rule that either requires or expressly permits a person to engage in the behaviour in question.

The FSA rules which contain a provision to the effect that behaviour conforming with that rule does not amount to market abuse (section 118(8) of the Act) are:

1. (1)

   the price stabilising rules; (MAR 2; see MAR 2.1.1 R(2));

2. (2)

   a rule relating to Chinese walls (COB 2.4.4 R (1)); see COB 2.4.4 R (4) and see also MAR 1.4.21 C and MAR 1.5.27 C;

3. (3)

   those parts of the listing rules which relate to the timing, dissemination or availability, content and standard of care applicable to a disclosure, announcement, communication or release of information. These are specified in MAR 1 Annex 1;

4. (4)

   rule 15.1(b) of the listing rules (in relation to share buy-backs).

The FSA exercises in MAR 1.7.7 C - MAR 1.7.8 C, with the approval of the Treasury, the powers conferred by section 120 of the Act (Provisions included in the Authority's code by reference to the City Code), save that any reference made to the SARs is made under section 119 of the Act and therefore does not require the approval of the Treasury.

These safe harbours apply in relation to behaviour likely to give rise to a false or misleading impression as described in MAR 1.5, and behaviour which would, or would be likely to, give rise to distortion as described in MAR 1.6, but not in relation to behaviour based on the misuse of information as described in MAR 1.4.

The FSA is satisfied that the remainder of the Takeover Code and SARs do not permit or require behaviour which amounts to market abuse. Much of the Takeover Code and the SARs is not directed specifically at the types of behaviour prohibited by the Act; for example, many provisions are directedat ensuring that an offer or stakebuilding is conducted within an orderly framework or that shareholders in a company are treated similarly. Other provisions, such as the rules dealing with the specific content of offeree and offeror documents, are encompassed within the general content standard in Rule 23 of the Takeover Code and have not, therefore, been given a specific safe harbour.

MAR 1.7.7 C and MAR 1.7.8 C do not apply in any case where the behaviour which conforms with the particular rule of the Takeover Code is nonetheless in breach of any General Principle set out at Section B of the Takeover Code which is relevant to that rule.

In applying MAR 1.7.7 C, the notes for the time being associated with the rules identified in the Takeover Code are treated as part of the relevant rule.

Certain provisions of the Takeover Code and of the SARs restrict the commercial freedom of a person by, for example, restricting the speed at which shares can be acquired. However, behaviour in compliance with such provisions will not be regarded as giving a false or misleading impression, as such restrictions will be taken into account in assessing whether behaviour falls below the standard reasonably to be expected.

In cases where none of the safe harbours in MAR 1.7.7 C to MAR 1.7.8 C apply, the regular user may not necessarily consider that complying with applicable requirements of the Takeover Code or the SARs will be sufficient in and of itself to demonstrate that behaviour does not amount to market abuse. An example may help to explain this. If, for example, a person were to comply with Rule 1 of the SARs in building a stake, but his decision to build the stake was based on relevant information and none of the safe harbours in MAR 1.4 applied, that person's behaviour would be likely to amount to market abuse. Nevertheless, the question whether a person has complied with relevant provisions of the Takeover Code and SARs which do not give a safe harbour may be relevant to a regular user's assessment of whether or not that person'sbehaviour has fallen below reasonably expected standards.