UK: Market Abuse and The Media

Last Updated: 3 March 2003

Article by Grania Baird and Richard Shillito

The Financial Services and Markets Act 2000 ("FSMA") which came into force on 1 December 2001 involved radical reform of the regulation of the financial services industry in the UK. The Financial Services Authority ("FSA") became the single central authority for financial market supervision and regulation within the UK and was given extensive rule making, investigation and enforcement powers.

Most significantly, the FSMA created a new market-abuse regime, a civil regime which supplements rather than replaces the existing criminal regimes for insider dealing and market manipulation and is designed to catch those market-abusers who have not been caught by existing legislation. The FSA investigation, which has led to confrontation with five national press organisations including the FT, over disclosure of sources, (see Media Bulletin, September 2002) arises from the criminal regime set up by the FSMA. The investigation is said to be into a potentially serious case of insider dealing/market manipulation offences under the Criminal Justice Act 1993 and/ or what is now s 397(3) of the FSMA. It is not alleged that the press has committed any offence. The FSA says it requires documents from the press for the purpose of tracking down the alleged market manipulator. This has led to a dispute about the extent to which the press is protected by the provisions of s 10 Contempt of Court Act 1981 from having to do anything which might disclose their source. The regime is not limited to investment professionals; it can apply to both authorised and unauthorised persons, including journalists.

The potentially very wide application of the market-abuse regime was not generally recognised by the media. As a result there was little or no lobbying during the drafting process to secure exemptions or "safe harbours" for journalists. More attention is now being paid to the Market-abuse Directive, an EU proposal designed to harmonise market-abuse provisions Europe-wide.

This article explains the offences created by the market-abuse regime and considers their potential impact on the media.

The market abuse- regime
In order for behaviour to constitute market abuse, it must:

  • occur in relation to a qualifying investment traded on a prescribed market;
  • satisfy one or more of the following conditions:

- involve the misuse of information;

- be likely to give a false or misleading impression;

- be likely to distort the market;

- fall below the standard reasonably expected by a regular user of the market; and

- not fall within a safe harbour.

The first element – misuse of information
Behaviour will be a misuse of information where it is based on material information, the information is not generally available to those using the market, the information is investment relevant and relates to matters which a regular user of the market would reasonably expect to be disclosed to other users in the market.

The Code of Market Conduct ("the Code" or "MAR"), published by the FSA, gives helpful guidance on what information is considered to be generally available. This will include information which has to be disclosed through an accepted channel for dissemination or otherwise under the rules of a prescribed market. Information will also be generally available if it is contained in records which are open to the public for inspection, it has otherwise been made public or it can be obtained through observation. (In each of these cases the fact that significant numbers of market users may not have obtained the information is irrelevant – the fact that it is available is sufficient.)

Misuse of information, the first element of market abuse, could occur for example where a journalist deals in the shares of a company ahead of the publication of an article he or she has written containing a recommendation to buy, sell or hold shares in the company.

This aspect was discussed in the FSA’s consultation paper CP59, prompted by the controversy surrounding the Mirror’s "Sharewatch" column. The FSA recognised that journalists could come within the first element of market abuse. However the FSA did not then provide examples of behaviour it may regard as unacceptable. The FSA’s approach is that such behaviour is best dealt with by promoting public awareness of what to bear in mind when deciding whether or not to act on the basis of journalists’ recommendations.

There are provisions in the PCC Code, at Clause 14, requiring journalists to disclose interests to their editor or financial editor, not to profit from financial information, and not to deal in shares about which they have written or intend to write. Enhanced disclosure requirements were also published in the PCC Best Practice Guidelines1. It appears that the FSA is likely to leave this issue largely to press self regulation. But that does not preclude the FSA from investigating and using its powers if it decides to do so.

The second element – false or misleading impressions
The Code identifies two general instances of behaviour creating a false or misleading impression; artificial transactions and disseminating information. The Code envisages two situations where behaviour involving dissemination of information, the category of most relevance to journalists, can amount to market abuse:

  • dissemination of incorrect information;
  • dissemination through an accepted channel without care.

In relation to the first situation, market abuse may occur where a person knows or could reasonably be expected to know that the information is false or misleading and disseminates the information to create a false or misleading impression. An article by a journalist satisfying these criteria may therefore constitute market abuse. It is important to remember however that the journalist would have to have the purpose of creating a false or misleading impression to commit market abuse.

In respect of the second situation, there is no purpose test. A person may commit market abuse where he or she disseminates information through an accepted channel for dissemination, without reasonable care having been taken to ensure that it was not false or misleading. During the consultation process the FSA explained that an accepted channel for dissemination of information will be one operated by a recognised investment exchange or otherwise, which disseminates information which listed companies are obliged to disclose (for example the regulatory news service provided by the London Stock Exchange). Information relating to a company’s financial position disseminated through a regulatory news service, where the provider did not check the information and which subsequently created a false or misleading impression as to the price of the company’s shares, could potentially amount to market abuse.

This aspect of market abuse is most likely to affect the primary providers of information, for example the company itself, its financial advisers, or its public relations advisers. Secondary information providers such as Bloomberg, other commercial news services or other newspapers are unlikely to be caught.

The third element – market distortion
In relation to the third element, the Code says that to constitute market abuse the behaviour must be such that a regular user would, or would be likely to, regard it as behaviour which would or would be likely to distort the market of the investment. As with false and misleading impressions, there must be a real likelihood that the behaviour would have such an effect.

The Code attempts to identify categories of distorting behaviour amounting to market abuse, such as abusive squeezes and price positioning. This element is aimed principally at those who are active in the markets such as traders, fund managers, and stockbrokers for example. It is therefore difficult to see how journalists could be caught.

The regular user test
The regular user test is a key part of the market-abuse regime. In order to amount to market abuse, behaviour must be within one of the three elements and be likely to be regarded by a regular user of the market as a failure on the part of the person concerned to observe standards of behaviour expected of a regular user of the market.

The regular user is someone who regularly deals on the market in investments of the kind in question and he will take into account compliance with rules of a recognised investment exchange and other rules or codes of conduct in deciding whether behaviour falls short of reasonably expected standards. It appears that the PCC Code would be included and so this should provide comfort to journalists acting in accordance with the PCC and/or other media codes of conduct. However compliance with such codes and rules will not always be acceptable. This lack of certainty is unhelpful. The FSA has however said that, in circumstances where a person has complied with a code of conduct but the FSA still considers there has been market abuse, its standard response is likely to be to offer guidance rather than to pursue enforcement action.

The code of market conduct and the concept of safe harbours
The Code contains three types of material:

  • descriptions of behaviour that, in the opinion of the FSA, amounts to market abuse;
  • descriptions of behaviour that, in the opinion of the FSA, does not amount to market abuse;
  • factors that, in the opinion of the FSA, are to be taken into account in determining whether or not behaviour amounts to market abuse.

The point of the Code is to describe the FSA’s view of the three tests of market abuse and the operation of the regular-user test. The Code gives guidance. It is not a comprehensive list of all behaviour that does or does not amount to market abuse.

If the Code says that specified behaviour does not amount to market abuse, described as "safe harbours", that is definitive and a person can be certain that this behaviour does not amount to market abuse.

Aside from safe harbours which are definitive, the other provisions of the Code may be taken into account in deciding whether or not behaviour amounts to market abuse, but are not definitive.

The FSA has accepted that the parameters of what the regular user will consider acceptable will only come with practical experience. Ultimately, the Financial Services and Markets Tribunal will decide the standards that the regular user expects. However until there have been published cases, there is considerable uncertainty.

Enforcement and penalties
The stated purpose of the FSA in enforcing the market-abuse regime is to protect the prescribed markets from any damage to their efficiency caused by manipulation of markets or misuse of information, to ensure high standards of market conduct and to maintain confidence in the financial system.

The FSA has a general power to impose financial penalties and issue public censures under sections 205 and 206 of the FSMA. It has not published a tariff of penalties and there is no upper limit on the level of penalty which may be imposed. The FSA also has powers to apply for injunctions and make restitution orders.

Not all cases involving market abuse will warrant enforcement action. The FSA will take into account the nature and seriousness of the behaviour. As to the level of any penalty to be imposed, it will take into account whether the behaviour was reckless or deliberate and the seriousness of its effect.

The FSA and the media
Given the very wide application of the market-abuse regime, participants in the media, particularly financial journalists, certainly have the potential to commit market abuse. This is particularly so given that the regime does not always require knowledge, intent or recklessness on the part of alleged abusers for market abuse to be committed (although for some elements purpose is implied or required). Instead, the effect of abusive behaviour is measured by the markets and other market participants. Human error on the part of journalists, without any element of intent, may still be caught. The FSA has said that the regime is about the adverse impact on the integrity and efficient operation of the market not the moral culpability of the players, and this could be so even without individual intent. The wide application and serious consequences of breach of the market-abuse regime which, although a civil offence, exposes the person to potentially unlimited fines, has caused considerable concern.

Recently the press and media have become more aware of the potential impact of the market-abuse regime on them. In November 2002, a conference on financial reporting was hosted by The Guardian and attended by representatives from The Guardian, The Financial Times, The Independent, Reuters and The Times. The potential application of financial services regulation to the press in the area of financial reporting was debated. The question is, however, although there is potential for the media to be caught, is this just a theoretical possibility or a real problem?

The FSA has made some statements which illustrate its approach to the media to date, for example:

  • that the financial markets rely on the important role played by the press in reporting and analysing information from companies or other issuers of information;
  • that use of the press to disseminate false or misleading information for the purposes of manipulating the price of investments threatens to undermine confidence in the accuracy of press reporting, thus damaging market confidence.

These assertions do not exclude the press from the market-abuse regime. Where the press are found to have satisfied the criteria for any of the three elements, then potentially they will be guilty of market abuse. In CP59 the FSA stated that the position of journalists in relation to the three main types of market abuse is generally no different from that of any other market participant who engages in market abuse. It was only in relation to share dealing in the context of an article where the FSA gave a more considered view on the position of journalists and has said it considers press self-regulation to be the most appropriate approach to this issue.

When questioned at the recent conference an FSA representative said that the FSA is not looking to regulate journalists as a prime target; it is concentrating on key market participants. However he did say that the market-abuse regime is available to ensure that the press is not misused.


The market-abuse regime is something of which the media industry needs to be aware. There is currently no safe harbour for journalism. Comfort can be taken from the FSA statements about its main targets and approach. In addition, Howard Davies, the FSA’s current CEO, has said that the FSA does not wish to pursue technical or inadvertent infringements of the marketabuse regime. The aim of the FSA is to prioritise and investigate only those cases which are material and significant and to adopt a proportionate response in such cases. It is likely therefore that companies and market players who abuse the market will be targeted rather than any inadvertent breaches by journalists.

As with any new regime we will have to wait to see how the FSA applies the market-abuse regime in practice, in particular how it treats the press, and there will be greater certainty when we have the benefit of some reported cases. Howard Davies has so far been reluctant to use the FSA’s extensive powers and has adopted a proportionate approach to regulation. However, he has recently announced his forthcoming departure. Although journalists can come within the regime, in practice they are unlikely to do so. Perhaps a more worrying issue is that where there are grounds for investigation the FSA could potentially use the regime and its powers to require evidence, including requiring the disclosure of sources in relation to a potential case of market abuse.

This new regime is something which the media need to be aware of, but its likely impact will probably be indirect (if at all) and legal advice should be sought where necessary.

The content of this article does not constitute legal advice and should not be relied on in that way. Specific advice should be sought about your specific circumstances.

1. See

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.