Introduction
This essay explores the legal frameworks surrounding civil offences and financial crimes in the UK, with a specific focus on insider dealing and market abuse under the Financial Services and Markets Act 2000 (FSMA 2000). It addresses four key areas: the definition of civil offences under FSMA 2000 and sources of law on insider dealing, a comparison of statutory and European Community (EC) contexts on insider dealing and market abuse, an analysis of general financial crime offences under FSMA 2000, the Fraud Act 2006, and the Theft Act 1968, and finally, a justification of how market abuse regulations and regulatory powers tackle insider dealing and related frauds. By examining these dimensions, the essay aims to provide a sound understanding of the legal mechanisms at play, alongside a limited critical perspective on their application.
Civil Offences under FSMA 2000 and Sources of Law on Insider Dealing
Under FSMA 2000, civil offences relate to breaches of regulatory requirements enforced by the Financial Conduct Authority (FCA). Section 123 of FSMA 2000 empowers the FCA to impose penalties for market abuse, including insider dealing, which is defined as the use of inside information to gain an unfair advantage in financial markets (FSMA 2000). This is not a criminal offence under this section but a civil breach subject to fines or sanctions. The primary sources of law on insider dealing include FSMA 2000 itself, particularly Sections 118-123, which outline behaviours constituting market abuse. Additionally, the Criminal Justice Act 1993 (CJA 1993), Part V, provides a criminal framework for insider dealing, complementing the civil provisions of FSMA 2000. These statutory sources are further informed by European directives, such as the Market Abuse Regulation (MAR) (EU No 596/2014), which harmonises rules across member states, even post-Brexit, through retained EU law in the UK.
Statutory Frameworks and EC Context on Insider Dealing and Market Abuse
The UK’s statutory framework, primarily through FSMA 2000 and CJA 1993, offers a dual civil and criminal approach to insider dealing. FSMA 2000 focuses on regulatory enforcement, while CJA 1993 targets criminal prosecution for deliberate misuse of inside information. In contrast, the EC context, embodied in MAR, aims for a broader, harmonised approach to prevent market abuse across Europe. MAR imposes obligations on issuers and traders to disclose inside information and prohibits manipulative practices, arguably providing a more cohesive framework than the UK’s bifurcated system. However, the UK’s approach allows for flexibility in enforcement—civil sanctions under FSMA 2000 can be quicker to impose than criminal proceedings under CJA 1993. Post-Brexit, discrepancies may emerge as the UK diverges from EU regulations, potentially creating enforcement gaps.
General Offences of Financial Crimes under Key Legislation
Financial crimes are addressed across multiple statutes. Under FSMA 2000, market abuse (including insider dealing and misleading statements) constitutes a general offence subject to civil penalties (Section 118). The Fraud Act 2006, meanwhile, covers broader offences like fraud by false representation (Section 2), which can apply to financial markets when false information influences investments. The Theft Act 1968, though less directly tied to financial markets, addresses offences like theft (Section 1), which might encompass misappropriation of funds in financial contexts. These statutes collectively provide a robust—if sometimes overlapping—framework. For instance, a single act of insider dealing could potentially breach FSMA 2000 civil rules, constitute fraud under the 2006 Act, or even theft if assets are misappropriated. This overlap, however, can complicate prosecution, as determining the appropriate charge requires careful legal analysis.
Market Abuse Regulations and Regulatory Powers Against Insider Dealing
Market abuse regulations, particularly under FSMA 2000 and MAR, alongside the FCA’s powers, act decisively against insider dealing and related frauds. The FCA can impose unlimited fines, ban individuals from trading, and require restitution (FSMA 2000, Section 384). Furthermore, MAR mandates timely disclosure of inside information, reducing opportunities for abuse. These mechanisms, generally effective, deter misconduct through both punitive and preventive measures. For example, high-profile fines levied by the FCA signal a zero-tolerance approach, though enforcement challenges remain due to the covert nature of insider dealing. The FCA’s investigative powers, including surveillance and data requests, are crucial but arguably limited by resource constraints and the sophistication of offenders.
Conclusion
This essay has outlined civil offences under FSMA 2000, identified key legal sources on insider dealing, compared UK and EC frameworks, analysed financial crime offences across statutes, and justified the role of regulatory powers in combating market abuse. While the UK’s legal mechanisms provide a sound foundation for addressing financial misconduct, gaps in enforcement and potential post-Brexit divergence from EU standards present ongoing challenges. A more integrated approach to overlapping statutes and enhanced regulatory resources could further strengthen the system. These issues highlight the importance of continuous legal and regulatory adaptation in an evolving financial landscape.
References
- Financial Services and Markets Act 2000. (2000) UK Public General Acts, legislation.gov.uk.
- Criminal Justice Act 1993. (1993) UK Public General Acts, legislation.gov.uk.
- Fraud Act 2006. (2006) UK Public General Acts, legislation.gov.uk.
- Theft Act 1968. (1968) UK Public General Acts, legislation.gov.uk.
- European Union. (2014) Regulation (EU) No 596/2014 on Market Abuse. EUR-Lex.
