Europe: revising the Market Abuse Directive - Commission consultation

The European Commission has today published a consultation paper seeking views on revisions to the Market Abuse Directive (MAD) (2003/6/EC): see here (pdf). Amongst the questions asked are:

• Should MAD be extended to cover attempts to manipulate the market?
• How can the powers of competent authorities to investigate market abuse be enhanced?
• To what extent need the sanction regimes be harmonised at the EU level in order to prevent market abuse?
• How can the system of cooperation among national and third country competent authorities be enhanced? What should the role of the European Securities and Markets Authority be in this regard?

Australia: the Corporations Amendment (No 1) Bill 2010 - draft published

The Treasury has published a draft of the Corporations Amendment (No 1) Bill 2010: see here. The Bill contains, amongst other things, provisions dealing with access to the register of members, the size of fines imposed for insider dealing and the powers of ASIC.

UK: insider dealing - arrests made in first joint FSA/SOCA investigation

The Financial Services Authority and Serious Organised Crime Agency have made arrests in connection with their first joint investigation of insider dealing. The investigation began in 2007. The FSA reports on its website:

Six men including two senior city professionals at leading city institutions and one city professional at a hedge fund have been arrested on suspicion of being involved in a sophisticated and long-running insider dealing ring. It is believed that the city professionals passed inside information to traders (either directly or via middlemen) who traded based on this information and have made significant profits as a result".

Europe: ECJ considers the market abuse directive

The opinion of the European Court of Justice in Spector Photo Group NV, Chris Van Raemdonck v Commissie voor het Bank, Financie- en Assurantiewezen (CBFA) (Case C-45/08) was given last week. The case, referred from the hof van beroep te Brussel (Court of Appeal of Brussels), required the ECJ to interpret, for the first time, the Market Abuse Directive (2003/6/EC). Article 2 provides:

1. Member States shall prohibit any person referred to in the second subparagraph who possesses inside information from using that information by acquiring or disposing of, or by trying to acquire or dispose of, for his own account or for the account of a third party, either directly or indirectly, financial instruments to which that information relates.

The first subparagraph shall apply to any person who possesses that information: [a] by virtue of his membership of the administrative, management or supervisory bodies of the issuer; or [b] by virtue of his holding in the capital of the issuer; or [c] by virtue of his having access to the information through the exercise of his employment, profession or duties; or [d] by virtue of his criminal activities".

The ECJ was required to consider, inter alia, whether making use of information for the purposes of Article 2 would be satisfied by the mere fact that a person in possession of inside information, acquires or disposes of, or tries to acquire or dispose of, for his own account or for the account of a third party, financial instruments to which that inside information relates. The ECJ held that this would amount to the use of inside information but recognised the right to rebut the presumption. In reaching this position, the ECJ made clear that the questions before it:

... must be determined in the light of the purpose of [the] directive, which is to protect the integrity of the financial markets and to enhance investor confidence. That confidence is based, in particular, on the assurance that they will be placed on an equal footing and protected from the misuse of inside information. Only usage which goes against that purpose constitutes prohibited insider dealing".

Further information is available in the ECJ's press release, available here (pdf).