Overview of  the Market Abuse Regulation 

The FCA implemented the UK Market Abuse Regulation (MAR) in 2016 to prevent market abuse and increase investor protection and market integrity. MAR rules and regulations prohibit insider dealing, unlawful disclosure of inside information and market manipulation. The purpose of MAR is to ensure that markets operate fairly and transparently and enhance the attractiveness of the UK securities market for investment and raising capital.  

Managing Conflicts of Interest and Market Abuse Offences Under MAR 

Access to insider information can lead to significant conflicts of interest and the risk that individuals use MNPI for personal gain. This could involve profiting from insider dealing or exerting undue influence on corporate decisions for individual gain rather than the best interest of the firm and its shareholders. Managing these conflicts of interest is critical to protecting market integrity and the well-being of consumers and other stakeholders and maintaining trust among investors and the industry. 

Managing conflicts of interest and MAR compliance includes monitoring and surveillance for a range of market abuse offences: 

• Insider dealing is the act of illegally using inside information to deal or attempt to trade in financial instruments or to recommend or induce another person to transact based on inside information.  
• Unlawful disclosure of inside information is the act of disclosing material non-public information or MNPI without following the proper procedure for dissemination of such information. MAR mandates companies to use insider lists to manage and track who accesses the information and when the events happened.   
• The improper use of inside information happens when someone uses insider information for their advantage. Firms should consider a robust training protocol for those who have access to inside information so that they understand their obligations.   
• Market manipulation occurs when an individual or company conducts transactions to mislead the market and affect the price and market value of assets, sometimes with the help of fictitious instruments.  
• Dissemination of false information means distributing information knowing that the material is false or misleading.  
• Misleading behaviour and market distortion involve taking actions that give the market a false impression in any way to impact prices or any market activity.  

What is a Market Sounding? 

As defined by the FCA in the October 2023 Market Watch 75, a market sounding is a process where issuers or their advisors communicate with potential investors to gauge interest in a possible transaction before it is publicly announced. The information gathered helps determine the price, size, and structure of the transaction. Market soundings often involve the disclosure of inside information, so they are regulated under MAR to ensure market integrity and prevent misuse of insider information. 

UK MAR provides a standard framework for legitimate disclosure of inside information by issuers or their advisors acting as Disclosing Market Participants (DMPs) when the information is shared within the normal operations of the firm: 

• Assess and record whether a market sounding will involve the disclosure of MNPI 
• Produce and maintain standard policies and procedures for communications with Market Sounding Recipients (MSRs) 
• Obtain consent from MSRs to receive the market sounding containing sensitive and privileged information 
• Inform MSR's that they are prohibited to use the disclosed information for trading or personal gain 
• Maintain records of the communications and lists of access to insider information 

MAR has a Wide Scope 

MAR applies not only to the financial industry or broker-dealers, investment advisers, and other registrants, but it extends to any individual in receipt of inside information who trades while in possession of that information. That means that a person who doesn't work in a financial institution can also be found guilty of market abuse.   

The FCA market abuse rules and regulations state that investment bankers or other staff should never benefit themselves from Material Non-Public Information (MNPI) or make the information public to benefit others. MAR requires companies to improve their controls to protect the market from insider dealing, unlawful disclosure of inside information and market manipulation. In addition, companies must take full responsibility to thoroughly train employees on the law, controls, surveillance, and supervision required to avoid market abuse.   

Preventing Market Abuse and Market Manipulation is a Broad and Global Priority 

Regulators worldwide are concerned with the risk of market abuse and market manipulation. Regulations to prevent insider trading are present across the globe and are very similar in their respective aim to MAR—to deter insiders from wielding unfair market advantage.  

In the United States, Section 204A of the Investment Advisers Act of 1940 requires firms to have policies and procedures to prevent the misuse of MNPI and avoid insider trading.  Also, in the US, recent updates to SEC Rule 10b5 make it illegal to use any measure to defraud, mislead the market, or conduct business operations that would deceive another person in the process of conducting transactions involving stock and other securities using trading plans and the affirmative defense to receipt of MNPI.   

The regulation of market manipulation in Australia prohibits any market abuse practice and sets criminal penalties for anyone who violates the law set out in the Financial Services Reform Act.

In Singapore, the Securities and Futures Act of Singapore (SFA) governs the market misconduct regime , and the Monetary Authority of Singapore (MAS) recently confirmed that market misconduct constitutes one of its key areas of focus for enforcement and investigations into cases of market abuse.  

ESMA's Approach to MAR 

The EU Market Abuse Regulation (EU MAR) came into effect in 2016. The European Securities and Markets Authority (ESMA) oversees the EU MAR, which aims to enhance market integrity and investor protection across the European Economic Area (EEA). MAR introduced stricter rules and a comprehensive regulatory framework to manage insider dealing, market manipulation, and the disclosure of MNPI. The core principles of the UK MAR closely mirror the EU MAR, with some modifications made to accommodate the needs of the UK regulatory environment. 

The EU market abuse regulation was onshored into UK law on 31 December 2020. Issuers with a dual listing of financial instruments on both EU and UK trading exchanges are required to comply with both regimes.  

Updates to MAR 

Although initially implemented in 2016, MAR is hardly old news. The prevention of market abuse is still a priority across the UK and Europe. MAR remains a cornerstone of the UK's and EU's efforts to combat market abuse, including insider trading and market manipulation. There have been ongoing updates to the EU and FCA market abuse rules and regulations over time to keep pace with changes in the regulatory climate, including: 

FCA's Work on Market Abuse and Manipulation: This June 2022 update explains the FCA's ongoing efforts to tackle market abuse and manipulation, emphasizing the importance of maintaining market integrity and investor confidence.  

Joint HM Treasury and FCA Statement on the Criminal Market Abuse Regime: This March 2023 statement highlights the commitment to reviewing the criminal market abuse regime as part of the Economic Crime Plan 2019-22. The review aims to ensure that the FCA can take action against market abuse in a manner commensurate with the seriousness and market impact of the abusive behavior.  

Market Abuse Regulation: The FCA provides information and updates on the application and structure of MAR, market abuse offenses, and exemptions on their official website on this regularly updated page.  

EU Listing Act Package: Formally adopted in October 2024, the EU Listing Act includes significant amendments to MAR, particularly concerning share buy-backs, market soundings, issuer obligations, and managers' disclosures. These changes are expected to take effect by the summer of 2024 to enhance transparency and market integrity.  

Managing Conflicts of Interest and Compliance with MAR 

Managing conflicts of interest and maintaining Compliance with EU and FCA market abuse rules and regulations involves implementing robust policies and procedures to identify, disclose, and mitigate potential conflicts. Firms must ensure that all employees are aware of their obligations to report any conflicts of interest that could influence their decision-making or the advice they provide. This includes maintaining detailed records of any conflicts and the steps taken to manage them.  

The Role of Technology in Managing MAR Compliance 

Regulators around the globe are using continually developing technologies, including artificial intelligence, to improve their detection of suspicious trading activities. These technologies enable regulators to analyze vast amounts of data more efficiently, identifying potential market abuse more effectively. Financial services firms need the latest compliance software to manage conflicts of interest, detect and mitigate potential market abuse and provide defensible proof of Compliance to keep pace.  

How MCO Can Help

Compliance with MAR involves ensuring that your firm has processes to manage the flow of sensitive data and protect against unlawful disclosure of inside information. MAR Compliance also requires effective policies, procedures and controls to identify and mitigate the risk of insider dealing across the firm. 

With MCO's MNPI and Insider List software, users can create and access insider lists quickly and efficiently. These lists provide Compliance with an overview of potential conflicts when exposed to confidential information that may include material non-public information. MyComplianceOffice enables firms to demonstrate Compliance with MAR, SEC securities legislation and other global market abuse and insider dealing regimes.