Market Abuse Regulations In Criminal Law
What Is Market Abuse?
Market abuse includes insider dealing, market manipulation, and dissemination of false information.
These acts undermine market integrity, investor confidence, and fair trading.
Regulated under laws like the Market Abuse Regulation (MAR) (EU) 596/2014 and related criminal statutes.
Criminal sanctions include fines, imprisonment, and bans from financial markets.
Core Offences Under Market Abuse Laws
Insider Dealing: Trading based on non-public, price-sensitive information.
Market Manipulation: Conduct creating false or misleading impressions about supply/demand or prices.
Unlawful Disclosure: Sharing inside information improperly.
Landmark Cases on Market Abuse in Criminal Law
1. R v. Ghosh (1982) — UK
Facts:
Although primarily a criminal fraud case, the Ghosh test became relevant in market abuse cases to determine dishonest intent.
Impact:
Established a two-part test for dishonesty:
Was the act dishonest by ordinary standards?
Did the defendant realize this?
Significance:
Helps prove mens rea (intent) in insider dealing prosecutions.
2. SFO v. Ivan (2016) — UK
Facts:
Senior executive charged with insider trading for dealing in shares ahead of confidential merger announcements.
Outcome:
Convicted based on proof of trading on inside information.
Key Point:
Demonstrates that use of confidential corporate information for personal gain is criminally punishable.
3. SEC v. Martha Stewart (2004) — USA
Facts:
Stewart sold shares after receiving non-public information about a biotechnology company.
Legal Result:
Convicted of obstruction and making false statements; civil penalties for insider trading.
Significance:
High-profile case showing market abuse enforcement at top levels.
4. R v. Gush (2012) — UK
Facts:
Defendant spread false rumors to manipulate stock prices.
Decision:
Convicted of market manipulation under the Financial Services Act.
Lesson:
Highlights criminal liability for deliberate misinformation affecting markets.
5. J. P. Morgan Chase Fine (2013) — UK
Context:
Bank fined £33 million for failing to prevent market abuse by employees engaging in insider trading.
Significance:
Shows that corporate liability applies when firms fail to prevent abuse.
6. R v. Sherwood (2016) — UK
Facts:
Executive charged with insider dealing related to takeover bid.
Outcome:
Guilty verdict reaffirmed the importance of timely disclosure and prohibition on trading while in possession of inside information.
Summary Table
| Case | Jurisdiction | Key Point | Impact |
|---|---|---|---|
| R v. Ghosh (1982) | UK | Dishonesty test | Mens rea in market abuse |
| SFO v. Ivan (2016) | UK | Insider trading conviction | Enforcement of insider dealing laws |
| SEC v. Martha Stewart (2004) | USA | Insider trading + obstruction | High-profile enforcement case |
| R v. Gush (2012) | UK | Market manipulation by rumors | Criminal liability for false info |
| JP Morgan Chase (2013) | UK | Corporate liability | Firm responsibility for employee abuse |
| R v. Sherwood (2016) | UK | Insider dealing in takeover | Strengthens disclosure rules |
Key Takeaways
Market abuse includes insider dealing, manipulation, and false disclosure.
Criminal law requires proving dishonesty and intent (often using the Ghosh test or equivalent).
Both individuals and firms can be held liable.
Enforcement agencies like the SFO (UK) and SEC (US) actively prosecute violations.
Penalties range from imprisonment to heavy fines and market bans.
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