Market abuse update

Key points

• Market abuse remains a top priority for the FSA and its track record of successful criminal prosecutions is growing.

• The Upper Tribunal has held that information was "inside information" because it was information of a kind which a reasonable investor would be likely to use as part of the basis of his investment decisions, even though the Tribunal apparently believed that the information was not likely to have a significant effect on the share price.

• New guidance makes it clear that the FSA is not required to prove that inside information was the reason for, or a material influence over, a person’s decision to trade.

• Thematic work on anti-market abuse systems and controls continues, in particular in relation to sounding-out practices and the quality of STRs.

• Recent enforcement cases for transaction reporting failures highlight the FSA's focus on accurate and timely transaction reports as an essential component of its market monitoring work.

• Firms should be considering whether they need to implement new systems to ensure compliance with tape recording requirements in respect of conversations on mobile telephones which come into force on 14 November 2011.

• The new Financial Conduct Authority will retain the FSA’s civil and criminal powers for tackling market abuse; proposed powers to publish warning notices may impact on the approach parties take in enforcement cases.

• The European Securities and Markets Authority has been using its new powers to gather information directly from firms.