UK: Extension Of Sunset For Sunset Clauses

Last Updated: 14 August 2008
Article by Tim Dolan and Daniel Park

Following a three month public consultation, the Treasury has recently made the Financial Services and Markets Act (Market Abuse) Regulations 2008 ("Regulations") which extend the date that the two super-equivalent provisions of the UK market abuse regime, also referred to as "sunset clauses", expire to 31 December 2009.

When implementing the Market Abuse Directive ("MAD") in July 2005, the Treasury elected to retain the then existing restrictions on market abuse that were beyond the scope of MAD (ie the two super-equivalent provisions) but made them subject to a "sunset clause" whereby those provisions would expire. The two super-equivalent provisions were given a sunset date of 30 June 2008. The Treasury committed to review the efficacy of the super-equivalent provisions around that time to determine whether or not their retention as part of the UK market abuse regime was justified. If the retention of the two super-equivalent provisions was justified the sunset date could be extended or they could be amended so that they would not expire.

The consultation took place between February to May 2008. For the purposes of the consultation, the Treasury released a consultation paper which considered, among other things, the differences between the current market abuse regime and the requirements under MAD and the use and market impact of the super-equivalent provisions to date.

The UK market abuse regime

The UK market abuse regime is set out in section 118 of the Financial Services and Markets Act 2000 ("FSMA") and the Code of Market Conduct. Section 118 of FSMA sets out five types of behaviour that amount to market abuse and also reflects the requirements of MAD. In addition, section 118 of FSMA includes two other types of behaviour which are super-equivalent to the requirements of MAD. These behaviours are set out in the two super-equivalent provisions and relate to:

  • the misuse of information (section 118(4) of FSMA); and
  • behaviour that is likely to give rise to a false or misleading impression or to market distortion (section 118(8) of FSMA).

With regard to the above mentioned two super-equivalent provisions the consultation paper set out five key differences:

  • RINGA: MAD uses the concept of inside information; however, the super-equivalent misuse of information provision uses the concept of "relevant information not generally available". Because this concept is wider than that of inside information it will apply to a wider set of information.
  • Definition of Investments: MAD only applies to certain types of investments. The consultation paper noted that the pace of innovation and the increased complexity of capital markets may have resulted in certain definitions used in MAD being out-of-date. For example, it is not clear whether or not MAD relates to credit default swaps.
  • Positive Action: MAD requires some positive action to be taken (eg dealing or disseminating information). However, the failure to take action can also have a detrimental impact on the market (eg when required regulatory disclosures are not made resulting in false or misleading impressions being given). The two super-equivalent provisions arguably capture both actions and failures to take action.
  • Insiders: Sections 118(2) and 118(3) of FSMA only apply if the relevant person falls within the definition of an "insider". A person will be an insider by virtue of how he or she obtained inside information or because he or she knew or could reasonably be expected to know that the information held by him or her was inside information. Demonstrating this may be difficult where relevant inside information has been disseminated through several persons before arriving in the hands of the ultimate dealer. However, the super-equivalent misuse of information provision does not require proof of how the relevant inside information was obtained; it need only be shown that it was "relevant information not generally available" and that a regular user of the market would regard or would be likely to regard it as relevant.
  • Market Coverage: There are differences between the markets that are covered by the two super-equivalent provisions and the markets that are covered by MAD. Whereas the two super equivalent provisions relate to UK recognised investment exchanges and the PLUS markets, MAD also relates to EU regulated markets as well as UK recognised investment exchanges and the PLUS markets. Therefore, the two super-equivalent provisions apply to a narrower range of exchanges and markets than those covered by MAD.

Market effect of the super-equivalent provisions

The consultation paper also discussed whether the super-equivalent provisions have had any effect in deterring market abuse. This was hard to measure given that the FSA has not brought a successful enforcement action under the two super-equivalent provisions to date. Although the consultation paper noted that this could be seen as evidence that MAD requirements alone were comprehensive enough to cover all types of behaviour that amount to market abuse it concluded that this was unlikely as market abuse cases have been considered by the FSA under both super-equivalent provisions but those cases have not been not further pursued for evidentiary reasons. Furthermore, the consultation paper noted that the FSA has indicated that it will be making greater use of its enforcement powers to deal with insider dealing and market abuse, and it is possible that there may be cases in the future based on either, or both, of the two super-equivalent provisions.

Extension of sunset date

The consultation paper recommended, and the majority of responses to the consultation supported, a short term extension of the sunset date of the super-equivalent provisions to 31 December 2009 pending the outcome of the 2008 European Commission review of MAD. This approach is sensible given that the European Commission review of MAD may lead to changes in MAD. If the Treasury had allowed the super-equivalent provisions to expire or entrenched the super-equivalent provisions indefinitely, it is possible that the UK would have to go through two sets of changes to its market abuse regime in order to implement MAD. Making two sets of changes in a relatively short timeframe would have been disruptive and possibly unnecessary. The Treasury's decision is therefore welcomed.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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
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.