Financial Services and Markets Bill

Financial Services and Markets Bill - continued	House of Commons

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	PART VII
	PENALTIES FOR MARKET ABUSE
	Market abuse
Market abuse.	95. - (1) For the purposes of this Act, market abuse is behaviour (whether by one person alone or by two or more persons jointly or in concert)-
	(a) which occurs in relation to qualifying investments traded on a market to which this section applies;
	(b) which satisfies any one or more of the conditions set out in subsection (2); and
	(c) which is likely, or (if the circumstances were publicly known or the behaviour became commonplace, or both) would be likely, to damage the confidence of such informed participants as are mentioned in subsection (2)(a), so far as it relates to investments of that kind, that it is a true and fair market.
	(2) The conditions are that the behaviour-
	(a) is based on information which is unavailable to informed participants in the market who are unaware of the behaviour but which, if available to such informed participants, would be likely to be regarded by them as relevant in deciding whether or not to enter into transactions involving investments of the kind in question;
	(b) is likely to give such informed participants a mistaken impression as to the supply of, or demand for, or as to the price or value of, investments of that kind;
	(c) is likely to distort the market so far as it relates to investments of that kind.
	(3) The Treasury may by order prescribe (whether by name or by description)-
	(a) the markets to which this section applies; and
	(b) the investments which are qualifying investments in relation to those markets.
	(4) The order may prescribe different investments or descriptions of investment in relation to different markets or descriptions of market.
	(5) Behaviour is to be disregarded for the purposes of subsection (1) unless it occurs-
	(a) in the United Kingdom; or
	(b) in relation to qualifying investments traded on a market to which this section applies which is situated in the United Kingdom.
	(6) For the purposes of this section, behaviour is to be regarded as occurring in relation to qualifying investments-
	(a) if it occurs in relation to anything which is the subject matter of those qualifying investments; or
	(b) if it occurs in relation to investments (whether qualifying or not) whose subject matter is those qualifying investments.
	(7) Information is not to be regarded for the purposes of this section as "unavailable" to informed participants in a market if the information could be obtained by research or analysis by or on behalf of such persons.
	(8) It is immaterial for the purposes of subsection (1) whether an outcome expressed in subsection (1)(c) or (2) as likely to occur actually occurs.
	(9) Any reference in this Act to a person engaged in market abuse is a reference to a person engaged in market abuse whether alone or with one or more other persons.
	(10) In this section-
	"behaviour" includes action or inaction;
	"informed participant", in relation to a market, means a participant in the market who has an understanding of the market;
	"investment" is to be read with section 20 and Schedule 2;
	"participants", in relation to a market, includes potential participants.
	The Code
The Code.	96. - (1) The Authority must prepare and issue a code for the purpose of helping to determine whether or not behaviour amounts to market abuse.
	(2) The code may specify-
	(a) descriptions of behaviour that, in the opinion of the Authority, amount to market abuse;
	(b) descriptions of behaviour that, in the opinion of the Authority, do not amount to market abuse;
	(c) factors that, in the opinion of the Authority, are to be taken into account in determining whether or not behaviour amounts to market abuse.
	(3) The code may make different provision in relation to persons, cases or circumstances of different descriptions.
	(4) The Authority may at any time alter or replace the code.
	(5) The Authority must publish the code and any altered or replacement code, but may do so in such manner as it considers most suitable for bringing it to the attention of those persons ("interested persons") who are likely to be affected by the exercise of the power under section 98.
	(6) Before issuing, altering or replacing the code the Authority must publish a draft of its proposals in such manner as it considers most suitable for bringing them to the attention of interested persons.
	(7) The draft must be accompanied by a statement that representations about the proposals may be made to the Authority within a specified time.
	(8) Before carrying out its proposals, the Authority must have regard to any representations made to it in accordance with subsection (7).
	(9) The Authority must, without delay, give the Treasury a copy of any code published under this section.
Effect of the Code.	97. - (1) If a person behaves in a way which is described (in the code in force under section 96 at the time of the behaviour) as behaviour that, in the Authority's opinion, does not amount to market abuse that behaviour of his is to be taken, for the purposes of this Act, as not amounting to market abuse.
	(2) Otherwise, the code in force under section 96 at the time when particular behaviour occurs may be relied on so far as it indicates whether or not that behaviour should be taken to amount to market abuse.
	Power to impose penalties
Power to impose penalties in cases of market abuse.	98. If the Authority is satisfied that a person-
	(a) is or has engaged in market abuse, or
	(b) by taking or refraining from taking any action has induced another person or persons to engage in market abuse,
	it may impose on him a penalty of such amount as it considers appropriate.
	Statement of policy
Statement of policy.	99. - (1) The Authority must prepare and publish a statement of its policy with respect to-
	(a) the imposition of penalties under section 98; and
	(b) the amount of penalties under that section.
	(2) The Authority may at any time alter or replace any statement of policy for the time being published under this section.
	(3) If any statement of policy for the time being published under this section is altered or replaced, the Authority must publish the altered or replacement statement.
	(4) In exercising, or deciding whether to exercise, its power under section 98 in the case of any particular behaviour, the Authority must have regard to any statement of policy published under this section at the time when the behaviour concerned occurred.
	(5) The Authority must publish any statement of policy under this section in such manner as it considers most suitable for bringing it to the attention of those who are likely to be affected by the exercise of the power under section 98.
	(6) If the Authority is preparing, altering or replacing a statement of policy under this section, it must consult such persons as it considers appropriate.
	(7) The Authority must, without delay, give the Treasury a copy of any statement of policy which it publishes under this section.

Prepared 17 June 1999