Improved guidance, clearer definition of “inside information” and resolution of Spector case uncertainties all required, say UK lawyers
The CLLS Company Law Committee and the Law Society (the “City lawyers”) have commented on the European Commission’s proposals for:
- A new Regulation on insider dealing and market manipulation (market abuse); and
- A new Directive on criminal sanctions for insider dealing and market manipulation.
The Commission published drafts of the Regulation and the Directive in October 2011, as we covered in this post.
The draft Regulation: suggestions for change and clarification
The City lawyers make a number of detailed comments on the draft Regulation, including:
- Its lack of the detail and guidance on which market participants rely to understand the ambit of the current market abuse regime, and in particular the absence in the draft of the clarificatory recitals in the current Market Abuse Directive.
- That ESMA should be empowered to issue technical standards around certain areas.
- That national competent authorities may still be able to issue guidance (such as the FSA’s Code of Market Conduct) on the market abuse regime – the concern being that the Regulation, as a maximum harmonisation measure, may restrict this ability.
- That the proposed new category of inside information contained in Article 6(1)(e) of the draft be amended to include an objective test of failure to observe a standard of behaviour, or it will “considerably broaden the range of information that could be regarded as inside information”.
- That the Regulation be amended to clarify the uncertainties around intention to deal on the basis of inside information caused by the Court of Justice of the EU’s decision in Spector (on which, see this detailed note by Herbert Smith).
The draft Directive
On the Directive, the City lawyers suggest that there should be clarification of whether the criminal regime that the Directive will harmonise across the EU will run alongside the civil regime (so, for example, the UK authorities can continue to use the civil regime), or whether (in the case of the criminal offences set out in the Directive) only a criminal sanction will be available and it will not be possible to bring a civil claim.
The Commission’s page on the proposed Regulation and Directive is here.
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