Made | 23rd February 2005 | ||
Laid before Parliament | 24th February 2005 | ||
Coming into force in accordance with regulation 1 |
Interpretation
2.
In these Regulations -
Amendment of Schedule 1 to the Criminal Justice Act 1993
3.
In Schedule 1 to the Criminal Justice Act 1993[5], at the end of paragraph 5(1) insert -
Amendment of Part 6 of the 2000 Act
4.
Schedule 1 (which contains amendments to Part 6 of the 2000 Act (official listing)) has effect.
Amendment of Part 8 of the 2000 Act
5.
Schedule 2 (which contains amendments to Part 8 of the 2000 Act (market abuse)) has effect.
Amendment of section 150 of the 2000 Act
6.
In subsection (4)(a) of section 150 (actions for damages) of the 2000 Act, for "listing rules" substitute "Part 6 rules".
Amendment of section 395 of the 2000 Act
7.
In section 395(13) of the 2000 Act after paragraph (b) insert -
Amendment of section 397 of the 2000 Act
8.
- (1) Section 397 (misleading statements and practices) of the 2000 Act is amended as follows.
(2) In subsection (4), for "price stabilising rules or control of information rules" substitute
(3) In subsection (5), the word "or" after paragraph (b) is repealed and after paragraph (c) insert -
Revocation of the Traded Securities (Disclosure) Regulations 1994
9.
The Traded Securities (Disclosure) Regulations 1994[6] are revoked.
Amendment of the 2001 Order
10.
- (1) In the 2001 Order, the following definition is inserted before the definition of a "UK recognised investment exchange" in article 3 -
(2) In the 2001 Order, for articles 4, 4A and 5 substitute -
(2) There are prescribed, as markets to which subsections (4) and (8) of section 118 apply -
Qualifying Investments
5.
There are prescribed, as qualifying investments in relation to the markets prescribed by article 4, all financial instruments within the meaning given in Article 1(3) of Directive 2003/6/EC of the European Parliament and the Council of 28 January 2003 on insider dealing and market manipulation (market abuse)[7].".
Amendment of the Financial Services and Markets Act 2000 (Recognition Requirements for Investment Exchanges and Clearing Houses) Regulations 2001
11.
In the Schedule to the Financial Services and Markets Act 2000 (Recognition Requirements for Investment Exchanges and Clearing Houses) Regulations 2001[8], paragraph 5 is repealed.
Nick Ainger
Jim Murphy
Two of the Lords Commissioners
23rd February 2005
(3) For paragraph (f), substitute -
2.
After section 73 insert -
3.
In section 74 (the official list), subsection (4) is repealed.
4.
For subsections (1) and (2) of section 91 (penalties for breach of listing rules), substitute -
(2) If, in the case of a contravention by an applicant or an issuer referred to in subsection (1)(a) or (1)(b)(i), the competent authority considers that a person who was at the material time a director of that applicant or issuer was knowingly concerned in the contravention, it may impose upon him a penalty of such amount as it considers appropriate.".
5.
In subsection (9) of section 95 (competition scrutiny), in paragraph (a) for "listing rules" substitute "Part 6 rules".
6.
After section 96 (obligations of issuers of listed securities), insert -
(d) persons connected to such persons discharging managerial responsibilities.
(2) The rules must in particular -
(3) Disclosure rules may make provision with respect to the action that may be taken by the competent authority in respect of non-compliance.
96B
Persons discharging managerial responsibilities and connected persons
- (1) For the purposes of this Part, a "person discharging managerial responsibilities within an issuer" means -
(2) A person "connected" with a person discharging managerial responsibilities within an issuer means -
is a director or a senior executive who has the power to make management decisions affecting the future development and business prospects of that body corporate.
96C
Suspension of trading
- (1) The competent authority may, in accordance with disclosure rules, suspend trading in a financial instrument.
(2) If the competent authority does so, the issuer of that financial instrument may refer the matter to the Tribunal.
(3) The provisions relating to suspension of listing of securities in section 78 apply to the suspension of trading in a financial instrument and the references to listing and securities are to be read as references to trading and financial instruments respectively for the purposes of this section.".
7.
In subsection (1) of section 97 (appointment by competent authority of persons to carry out investigations) -
has been knowingly concerned in a breach of Part 6 rules by that issuer or applicant for listing.";
(c) paragraph (c) is repealed.
8.
After subsection (1) of section 99 (fees), insert -
9.
At the end of subsection (2) of section 100 (penalties), insert -
10.
In section 101 (listing rules: general provisions) -
11.
In subsection (1) of section 103 (interpretation of Part 6) -
12.
In paragraph 2(a) of Schedule 7 (the Authority as competent authority for Part 6), for listing rules substitute "Part 6 rules".
(b) falls within any one or more of the types of behaviour set out in subsections (2) to (8).
(2) The first type of behaviour is where an insider deals, or attempts to deal, in a qualifying investment or related investment on the basis of inside information relating to the investment in question.
(3) The second is where an insider discloses inside information to another person otherwise than in the proper course of the exercise of his employment, profession or duties.
(4) The third is where the behaviour (not falling within subsection (2) or (3)) -
(5) The fourth is where the behaviour consists of effecting transactions or orders to trade (otherwise than for legitimate reasons and in conformity with accepted market practices on the relevant market) which -
(6) The fifth is where the behaviour consists of effecting transactions or orders to trade which employ fictitious devices or any other form of deception or contrivance.
(7) The sixth is where the behaviour consists of the dissemination of information by any means which gives, or is likely to give, a false or misleading impression as to a qualifying investment by a person who knew or could reasonably be expected to have known that the information was false or misleading.
(8) The seventh is where the behaviour (not falling within subsection (5), (6) or (7)) -
and the behaviour 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.
(9) Subsections (4) and (8) and the definition of "regular user" in section 130A(3) cease to have effect on 30 June 2008 and subsection (1)(b) is then to be read as no longer referring to those subsections.
118A
Supplementary provision about certain behaviour
- (1) Behaviour is to be taken into account for the purposes of this Part only if it occurs -
(2) For the purposes of subsection (1), as it applies in relation to section 118(4) and (8), a prescribed market accessible electronically in the United Kingdom is to be treated as operating in the United Kingdom.
(3) For the purposes of section 118(4) and (8), the behaviour that is to be regarded as occurring in relation to qualifying investments includes behaviour which -
(4) For the purposes of section 118(7), the dissemination of information by a person acting in the capacity of a journalist is to be assessed taking into account the codes governing his profession unless he derives, directly or indirectly, any advantage or profits from the dissemination of the information.
(5) Behaviour does not amount to market abuse for the purposes of this Act if -
(6) Subsections (2) and (3) cease to have effect on 30 June 2008.
118B
Insiders
For the purposes of this Part an insider is any person who has inside information -
118C
Inside information
- (1) This section defines "inside information" for the purposes of this Part.
(2) In relation to qualifying investments, or related investments, which are not commodity derivatives, inside information is information of a precise nature which -
(3) In relation to qualifying investments or related investments which are commodity derivatives, inside information is information of a precise nature which -
(4) In relation to a person charged with the execution of orders concerning any qualifying investments or related investments, inside information includes information conveyed by a client and related to the client's pending orders which -
(5) Information is precise if it -
(6) Information would be likely to have a significant effect on price if and only if it is information of a kind which a reasonable investor would be likely to use as part of the basis of his investment decisions.
(7) For the purposes of subsection (3)(c), users of markets on which investments in commodity derivatives are traded are to be treated as expecting to receive information relating directly or indirectly to one or more such derivatives in accordance with any accepted market practices, which is -
(8) Information which can be obtained by research or analysis conducted by, or on behalf of, users of a market is to be regarded, for the purposes of this Part, as being generally available to them.".
2.
- (1) Section 119 (the code) is amended as follows.
(2) In subsection (2), after paragraph (c), insert -
(3) After subsection (2), insert -
3.
After section 130 (guidance), insert -
(2) An order may prescribe different investments or descriptions of investment in relation to different markets or descriptions of market.
(3) In this Part -
(4) Any reference in this Act to a person engaged in market abuse is to a person engaged in market abuse either alone or with one or more other persons.".
4.
After section 131 insert -
(3) The second condition is that the information or other matter disclosed came to the discloser in the course of his trade, profession, business or employment.
(4) The third condition is that the disclosure is made to the Authority or to a nominated officer as soon as is practicable after the information or other matter comes to the discloser.
(5) A disclosure to a nominated officer is a disclosure which is made to a person nominated by the discloser's employer to receive disclosures under this section, and is made in the course of the discloser's employment and in accordance with the procedure established by the employer for the purpose.
(6) For the purposes of this section, references to a person's employer include any body, association or organisation (including a voluntary organisation) in connection with whose activities the person exercises a function (whether or not for gain or reward) and references to employment must be construed accordingly.".
Implementation of the Market Abuse Directive is also being effected by the Financial Services Authority (FSA) using its powers under the Financial Services and Markets Act 2000(c.8)("the Act") and by the Investment Recommendation (Media) Regulations 2005 (S.I. 2005/382), which give effect to Article 6.5 of the Market Abuse Directive and to Commission Directive 2003/125/EC of 22 December 2003[14] to the extent that these are not dealt with by FSA rules.
Regulations 3 and 8 amend existing references to behaviour which is in conformity with 'price stabilising rules' in the Act and in the Criminal Justice Act 1993 (c.36) so that this extends to behaviour which is in conformity with the relevant provisions of Commission Regulation (EC) No 2273/2003.
Regulations 6 and 7 make miscellaneous consequential amendments to the Act.
Regulation 9 revokes the Traded Securities (Disclosure) Regulations 1994 (S.I. 1994/188) and regulation 11 repeals paragraph 5 of the Schedule to the Financial Services and Markets Act 2000 (Recognition Requirements for Investment Exchanges and Clearing Houses) Regulations 2001 (S.I. 2001/995) as these provisions are superseded by the amendments made to Part 6 of the Act.
Regulation 10 amends the Prescribed Markets and Qualifying Investments Order (S.I. 2001/996) so as extend the scope of markets to which certain provisions of Part 8 of the Act apply to include 'regulated markets' within the meaning in Article 1.13 of Council Directive 1993/22/EC of 10 May 1993 in investment services in the securities field[15], and amends the scope of the qualifying instruments covered by Part 8 to include all 'financial instruments' within the meaning in Article 1.3 of the Market Abuse Directive.
Regulation 4 and Schedule 1 amend Part 6 of the Act. Part 6 already enabled the FSA to make rules in relation to the continuing obligations of issuers whose securities are admitted to the official list. Rules made under Part 6 (which are to be known as 'Part 6 rules' in accordance with section 73A(1)) may now relate not only to securities admitted to the official list but to any financial instrument admitted to trading on a regulated market.
Paragraph 6 of Schedule 1 inserts sections 96A, 96B and 96C into Part 6 of the Act. Section 96A requires the FSA to ensure that certain inside information is disclosed and that lists of those with access to inside information are drawn up. It also requires the FSA to ensure that persons discharging managerial responsibilities within an issuer and persons connected to them disclose certain details of their transactions in shares of that issuer.
Section 96B defines "persons discharging managerial responsibilities" and "connected persons" for the purposes of Part 6 of the Act. Section 96C enables the FSA to suspend trading in a financial instrument in accordance with the disclosure rules in the same manner as it may already suspend trading in listed securities under section 78 of the Act.
Paragraphs 3, 4, 5, 7, 8, 9, 10 and 11 of Schedule 1 make miscellaneous consequential amendments to Part 6 of the Act.
Regulation 5 and Schedule 2 amend Part 8 of the Act. Paragraph 1 of Schedule 2 replaces the definition of market abuse in section 118 of the Act and makes a number of consequential amendments to bring it into line with the Market Abuse Directive. Section 118(4) and (8) retains the definitions of market abuse which are broader than those in Articles 1 to 5 of Directive 2003/6/EC and already in section 118 of the Act. Section 118(9) provide that these provisions are due to cease on 30 June 2008; section 118A(6) does the same for the related provisions in section 118A.
Paragraph 1 of Schedule 2 also inserts sections 118B and 118C, which define who are "insiders" and what constitutes "inside information" for the purposes of Part 8 of the Act.
Section 119 of the Act requires the FSA to publish a code containing guidance on whether or not behaviour amounts to market abuse. Paragraph 2 of Schedule 2 amends section 119(2) so that the code may specify descriptions of behaviour that are or are not accepted market practices in relation to specified markets for the purposes of Part 8 of the Act. It also inserts section 119(2A) which provides that the FSA, in determining what are and what are not accepted market practices, must have regard to the procedures laid down in Articles 2 and 3 of Commission Directive 2004/72/EC.
Paragraph 3 of Schedule 2 inserts section 130A into Part 8 of the Act. Section 130A(1) and (2) effectively amends and replaces the existing section 118(3) and (4) of the Act; section 130A(3) effectively amends and replaces the definitions in the existing section 118(10) of the Act.
Paragraph 4 of Schedule 2 inserts section 131A into Part 8 of the Act. This provision gives effect to Article 11.3 of Commission Directive 2004/72/EC, which requires Member States to ensure that persons notifying competent authorities of cases of suspected market abuse are not liable for any breach of disclosure of information.
A full regulatory impact assessment of the effect that this instrument will have on the costs of business may be obtained from the Capital Markets and Governance Team, HM Treasury, 1 Horse Guards Road, London SW1A 2HQ. A transposition note showing how the main provisions of this directive will be transposed into UK law is available from the same address. Both documents are also available on HM Treasury's website (www.hm-treasury.gov.uk). Copies of both of these documents have been placed in the libraries of both Houses of Parliament.
[2] 1972 c.68; by virtue of the amendment of section 1(2) made by section 1 of the European Economic Area Act 1993 (c.51) regulations may be made under section 2(2) to implement obligations of the United Kingdom created or arising under the Agreement on the European Economic Area signed at Oporto on 2nd May 1992 (Cm 2073) and the Protocol adjusting that Agreement signed at Brussels on 17th March 1993 (Cm 2183).back
[6] S.I. 1994/188, as amended by S.I. 2001/3649.back
[7] O.J. L 96, 12.4.2003, p.16; applied to the EEA by Joint Committee Decision 38/2004 of 23 April 2004 (not yet published in the Official Journal of the European Communities).back
[10] OJ No L96, 12.4.2003, p.16.back
[11] OJ No L336, 23.12.2003, p.33.back
[12] OJ No L339, 24.12.2003, p.30.back
[13] OJ No L162, 30.4.2004, p.70.back
[14] OJ No L339, 24.12.2003, p73back
[15] OJ No L141, 11.6.1993, p.27back