1. UK IMPLEMENTATION OF THE MARKET ABUSE REGIME DILWYN GRIFFITHS HEAD OF MARKET MONITORING FINANCIAL SERVICES AUTHORITY 23 MAY 2005

2. OVERVIEW Key changes required to the UK regime Where we remain different Intelligent copy out Change in form but not substance – some examples Towards a convergent EU approach on market abuse

3. LEGISLATIVE FRAMEWORK EU Legislation –Level 1 – MAD itself –Level 2 – 3 Directives and 1 Regulation Domestic Implementation –Changes to FSMA (Pt VIII and Pt VI) –FSA Handbook –NB HMT Regulations on research

4. KEY CHANGES (1) 4 Offences Misuse of information False and misleading impressions Distortion Requiring and encouraging market abuse

5. KEY CHANGES (2) …..Become 8 ! Insider dealing Improper disclosure Misuse of information Manipulating transactions Manipulating devices Dissemination of false and misleading information Misleading behaviour and distortive behaviour Requiring and encouraging market abuse

6. KEY CHANGES (3) Welcome to Mandatory Suspicious Transaction Reports Insider Lists Accepted Market Practices Concept Front running as Market Abuse Wider Requirements –Markets and products caught –Scope of disclosure rules –Scope of dealing disclosures –More investment research disclosures

7. KEY CHANGES (4) Farewell Regular User Test (for the most part) Broad Trading Information Safe Harbour

8. WHERE WE DIFFER Markets Covered –Aim, OFEX and Commodity Derivatives Markets as well as current ISD ‘regulated markets’ Misuse of ‘relevant’ information not generally available as well as inside information Behaviour not just transactions and orders to trade But sunset provisions

9. INTELLIGENT COPY OUT STATUS QUOCOPY OUT INTELLIGENT COPY OUT THESISANTITHESIS SYNTHESIS

10. INTELLIGENT COPY OUT (2) Use of Recitals –Trading Information Pragmatic Reading of Text –Insider Lists Persons acting on behalf of issuers Dealing with Market Rumour

11. CHANGES IN FORM Legislation rewritten Code of Market Conduct completely rewritten Disclosure Rules replace Chapter 9 of Listing Rules Lots of new terminology (e.g. reasonable investor test)

12. BUT NOT SUBSTANCE BUT Abusive behaviour on 30 June will be abusive behaviour on 1 July Legitimate behaviour not penalised Information disclosure requirements the same (essentially)

13. A CONVERGENT EU APPROACH CESR MAD Group –Accepted market practices –Behaviour considered to be Market Manipulation –Signals of possible suspicious transactions Can look at other issues

14. A CONVERGENT EU APPROACH (2) But Limits to progress –At least in short/medium term Inside information possession and use vs “on the basis of” ‘Defences’ against a charge of insider dealing Can’t expect regulators to harmonise rules and approach if laws differ