SUP 15.10 1Reporting suspicious transactions (market abuse)
Application: where
This section applies in relation to activities carried on from an establishment maintained by the firm or its appointed representative in the United Kingdom. [Note: Article 7 2004/72/EC]
Notification of suspicious transactions: general
A firm which arranges or executes a transaction with or for a client in a qualifying investment admitted to trading on a prescribed market and which has reasonable grounds to suspect that the transaction might constitute market abuse must notify the FSA without delay.
[Note: Article 6(9) Market Abuse Directive]
Notification of suspicious transactions: investment firms and credit institutions
A firm, that is an investment firm or a credit institution, must decide on a case-by-case basis whether there are reasonable grounds for suspecting that a transaction involves market abuse, taking into account the elements constituting market abuse. [Note: Articles 1(3) and 7 2004/72/EC]
- (1)
Notification of suspicious transactions to the FSA requires sufficient indications (which may not be apparent until after the transaction has taken place) that the transaction might constitute market abuse. In particular a firm will need to be able to explain the basis for its suspicion when notifying the FSA (see SUP 15.10 R). Certain transactions by themselves may seem completely devoid of anything suspicious, but might deliver such indications of possible market abuse, when seen in perspective with other transactions, certain behaviour or other information (though firms are not expected to breach effective information barriers put in place to prevent and avoid conflicts of interest so as actively to seek to detect suspicious transactions). [Note: Recital 9 2004/72/EC]
- (2)
Assistance in identifying the elements constituting market abuse may be derived from the Code of Market Conduct (MAR 1), and some example indications of market abuse are set out in SUP 15 Ann 5 G. A fuller set of example indications is published by the Committee of European Securities Regulators (CESR).
Timeframe for notification: investment firms and credit institutions
If an investment firm or a credit institution becomes aware of a fact or information that gives reasonable ground for suspicion concerning a transaction, it must make its notification under this section without delay. [Note: Article 8 2004/72/EC]
Content of notification: investment firms and credit institutions
- (1)
If an investment firm or a credit institution is obliged to make a notification to the FSA under this section, it must transmit to the FSA the following information:
- (a)
a description of the transaction, including the type of order (such as limit order, market order or other characteristics of the order) and the type of trading market (such as block trade); and
- (b)
the reasons for suspicion that the transaction might constitute market abuse.
- (a)
- (2)
In addition the following information must be provided to the FSAas soon as it becomes available:
- (a)
the means for identification of the persons on behalf of whom the transaction has been carried out, and of other persons involved in the relevant transaction;
- (b)
the capacity in which the firm operates (such as for own account or on behalf of third parties); and
- (c)
any other information which may have significance in reviewing the suspicious transaction. [Note: Article 9 2004/72/EC]
- (a)
Means of notification: investment firms and credit institutions
An investment firm or a credit institution making a notification to the FSA under this section may do so:
- (1)
If a notification is made by telephone, the FSA may subsequently request confirmation of the notification in writing. [Note: Article 10 2004/72/EC]
- (2)
When making a notification in writing it may be convenient to use the form for suspicious transaction reports provided on the FSA's website. This form follows the common standard approved by CESR.
Liability and professional secrecy: investment firms and credit institutions
- (1)
An investment firm or a credit institution which notifies the FSA under this section must not inform any other person, in particular the persons on behalf of whom the transaction has been carried out or parties related to those persons, of this notification, except in accordance with an obligation imposed by or under statute.
- (2)
Notwithstanding any other provision of the Handbook a notification in good faith under this section to the FSA does not constitute a breach of any restriction on disclosure of information imposed by the Handbook. [Note: Article 11 2004/72/EC]
Note: Section 131A of the Act sets out additional protections from liability for a person who makes a notification to the FSA under this section (or who passes the relevant information to someone designated by his employer to do so).