Member Article

On the 6th July 2005 Regulations implementing the EU Market Abuse Directive 2003/6/EC (“MAD”) came into force (some aspects of the Regulations came into force on Oct 1). MAD aims to introduce a Euro standard for insider dealing and market manipulation so as to promote market integrity and investor confidence in the financial markets. The Regulations apply to any financial instrument admitted to trading on a regulated market (or where a request for admission to trading has been made irrespective of whether the transaction takes places on that market). While insider dealing has been a statutory offence in Ireland since the implementation of the Insider Dealing Directive 89/592/EC by Part V of the Companies Acts 1990 up to now market manipulation has not been a statutory offence in Ireland. This is in contrast to the position in the UK where a comprehensive framework regulating market manipulation has been in place for some time. Insider dealing, broadly refers to dealing in securities with the benefit of unpublished price sensitive information. Market manipulation however is the actual manipulation of the market, for example, providing false information or engaging in fictitious transactions, or where someone seeks to distort the price of financial instruments by giving misleading information about their value. MAD is complemented by four further EU initiatives, namely three Commission Directives, Commission Directive 2003/124/EC, Commission Directive 2003/125/EC, Commission Directive 2004/72/EC and Commission Regulation 2273/2003. These further directives are also implemented by the Regulations. They provide detailed criteria for determining what constitutes inside information, public disclosure for insider information and also a definition of market manipulation. They also expand on the non-exhaustive factors which have to be taken into account when assessing possible market manipulation. The conditions for benefiting from exemptions from the prohibitions of market abuse in the case of share buy-back programmes and price stabilisation of financial instruments are also addressed. MAD requires each member state to establish a single regulatory and supervisory authority to deal with the offences of insider dealing and market manipulation. In Ireland this regulatory function will be carried out by the Irish Financial Services Regulatory Authority (“the IFSRA”). The Regulations make provision for the IFSRA to recognise certain market practices as being acceptable. The factors that should be taken into account include the transparency of the practice, the need to safeguard the operation of the market forces and the impact of the practice on market liquidity. It should also be noted that while most aspects of MAD and the accompanying Directives have been implemented by the Regulations, some provisions have been implemented by the Investment Funds, Companies and Miscellaneous Provisions Act, 2005. This is because primary legislation is required to provide for the indictable offences of insider dealing and market manipulation and also to give the IFSRA the relevant rule making powers. The regulations run to 130 pages of text and a more detailed update on these regulations and their potential application to particular businesses will be circulated as soon as possible.

 

Link to article