MAR 1.9 Market abuse (misleading behaviour) & market abuse (distortion)
Table: section 118(8) of the Act:
"The seventh [type of behaviour] is where the [behaviour] (not [amounting to market abuse (manipulating transactions), market abuse (manipulating devices), or market abuse (dissemination)]) |
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(a) |
is likely to give, a [regular user] of the market a false or misleading impression as to the supply of, demand for or price or value of, [qualifying investments] [market abuse (misleading behaviour)]; or |
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(b) |
would be, or would be to likely to be, regarded by a [regular user] of the market as [behaviour] that would distort, or would be likely to distort, the market in such an investment [market abuse (distortion)] |
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and ... is likely to be regarded by a [regular user] of the market as a failure on the part of the person concerned to observe the standard of [behaviour] reasonably expected of a person in his position in relation to the market |
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Table: section 118(8) of the Act as modified by the RAP Regulations
11 1"The seventh [type of behaviour] is where the [behaviour] (not [amounting to market abuse (manipulating transactions), market abuse (manipulating devices) or market abuse (dissemination)] |
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(a) |
is likely to give a [regular user] of the auction platform a false or misleading impression as to the supply of, demand for or price or value of, [qualifying investments] [market abuse (misleading behaviour)], or |
(b) |
would be, or would be likely to be, regarded by a [regular user] of the auction platform as [behaviour] that would distort, or would be likely to distort, the auction of such an investment [market abuse (distortion)] |
and the behaviour is likely to be regarded by a [regular user] of the auction platform as a failure on the part of the [person] concerned to observe the standard of [behaviour] reasonably expected of a [person] in his position in relation to the market." |
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Descriptions of behaviour that amount to market abuse (misleading behaviour) under section 118(8)(a) or market abuse (distortion) under section 118(8)(b)
The following behaviours are, in the opinion of the FSA , market abuse (misleading behaviour) if they give, or are likely to give, a regular user of the market a false or misleading impression:
- (1)
the movement of physical commodity stocks, which might create a misleading impression as to the supply of, or demand for, or price or value of, a commodity or the deliverable into a commodity futures contract; and
- (2)
the movement of an empty cargo ship, which might create a false or misleading impression as to the supply of, or the demand for, or the price or value of a commodity or the deliverable into a commodity futures contract.
Short selling in relation to financial sector companies
Factors to be taken into account: false or misleading impressions
In the opinion of the FSA , the following factors are to be taken into account in determining whether or not behaviour is likely to give a regular user a false or misleading impression as to the supply of or the demand for or as to the price or value of one or more qualifying investments or related investments:
- (1)
the experience and knowledge of the users of the market or auction platform11 in question;
- (2)
the structure of the market or auction platform,11 including its reporting, notification and transparency requirements;
- (3)
the legal and regulatory requirements of the market or auction platform11 concerned;
- (4)
the identity and position of the person responsible for the behaviour which has been observed (if known); and
- (5)
the extent and nature of the visibility or disclosure of the person's activity.
Factors to be taken into account: standards of behaviour
In the opinion of the FSA , the following factors are to be taken into account in determining whether or not behaviour that creates a false or misleading impression as to, or distorts the market or auction platform11 for, a qualifying investment , has also failed to meet the standard expected by a regular user:
- (1)
if the transaction is pursuant to a prior legal or regulatory obligation owed to a third party;
- (2)
if the transaction is executed in a way which takes into account the need for the market or auction platform11 as a whole to operate fairly and efficiently; or
- (3)
the characteristics of the market or auction platform11 in question, including the users and applicable rules and codes of conduct (including, if relevant, any statutory or regulatory obligation to disclose a holding or position, such as under DTR 5 )11;
3 - (4)
the position of the person in question and the standards reasonably to be expected of him in light of his experience, skill and knowledge;
- (5)
if the transaction complied with the rules of the relevant prescribed markets or prescribed auction platform11 about how transactions are to be executed in a proper way (for example, rules on reporting and executing cross-transactions); and
- (6)
if an organisation has created a false or misleading impression, whether the individuals responsible could only know they were likely to create a false or misleading impression if they had access to other information that was being held behind a Chinese wall or similarly effective arrangements.