For advice on how Safecall can help you with Market Abuse Regulation compliance, call us on +44 (0) 191516 7720 or send us an email to info@safecall.co.uk.
Understanding The Market Abuse Regulation (MAR) is crucial for whistleblowing managers overseeing the receipt of whistleblower reports and any subsequent workplace investigations.
Whether you are constructing a whistleblowing policy, or responsible for the management of the whistleblowing process, knowledge of MAR and its requirements can help safeguard your business from both cultural and regulatory standpoints.
MAR is a pivotal legislation in the UK that aims to increase market integrity and investor protection. It was originally an EU regulation (EU MAR) that came into effect on 3 July 2016. However, it was on-shored into UK law on 31 December 2020 by the European Union (Withdrawal) Act 2018.
What does MAR stipulate?
UK MAR applies to a wide range of financial instruments and activities.
It contains prohibitions of insider dealing, unlawful disclosure of inside information, and market manipulation. Employers, particularly those in the financial sector, are required to ensure compliance with all relevant provisions of UK MAR. This includes the need for proper systems and controls to prevent and detect market abuse.
The Financial Conduct Authority (FCA) holds significant investigative powers to ensure compliance with the market abuse regulations. It can request information from individuals, firms, and market operators to assess potential breaches. If a violation is identified, the FCA has the authority to impose penalties, including fines and sanctions.
Key Tenets of MAR
Insider Trading: Insider trading involves trading based on non-public information. MAR strictly prohibits this practice to ensure that all investors have a level playing field. This means that any individual with access to confidential information that could impact a company’s stock price must not use this information for personal gain.
Improper Disclosure: The regulation also addresses the unlawful disclosure of inside information. This includes any act of sharing confidential information with unauthorised individuals or entities. Proper protocols must be in place to safeguard sensitive information and ensure it is only disclosed through official channels.
Market Manipulation Market manipulation refers to activities that distort market prices or mislead investors. This can include spreading false information, conducting trades to create a misleading appearance of supply or demand, or any other actions that could deceive market participants. MAR aims to maintain fair and transparent market conditions by prohibiting such practices.
Dissemination of False Information Spreading false or misleading information that could affect market prices is another critical area covered by MAR. This tenet ensures that all market communications are accurate and truthful, thereby protecting investors from making decisions based on incorrect data.
Suspicious Transaction Reporting MAR requires the detection and reporting of suspicious transactions and orders. This involves monitoring trading activities for any signs of market abuse and promptly reporting any suspicious behaviour to the Financial Conduct Authority (FCA). This helps in the early detection and prevention of potential market abuse.
Requirements for Employers and Organisations
To comply with MAR, employers and organisations must implement several measures:
Implement Systems and Controls: Organisations must establish robust systems and controls to prevent and detect market abuse. This includes having effective surveillance and monitoring systems in place to identify any suspicious activities. One of these will be a whistleblowing system, often called a whistleblower hotline, or speak up service.
Maintain Insider Lists: Companies are required to maintain accurate records of individuals who have access to inside information. These insider lists must be updated regularly and made available to the FCA upon request.
Report Suspicious Activities: Any suspicious transactions or orders must be reported to the FCA through Suspicious Transaction and Order Reports (STORs). This is a crucial step in ensuring that potential market abuse is identified and addressed promptly.
Training and Awareness: Regular training sessions should be conducted to ensure that employees are aware of MAR requirements and understand their responsibilities. This helps in fostering a culture of accountability and transparency within the organisation.
Disclosure Obligations: Organisations must promptly disclose inside information to the public unless a delay is justified. This ensures transparency and helps maintain investor confidence in the market.
By adhering to these requirements, organisations can help maintain a fair and transparent market environment, ultimately contributing to the overall integrity and stability of the financial markets.
Consequences of Breaching Compliance
Breaching the Market Abuse Regulation (MAR) can lead to severe consequences for individuals and organisations. The Financial Conduct Authority (FCA) has the authority to impose a range of sanctions to maintain market integrity and protect investors. Here, we outline the potential repercussions of non-compliance with MAR.
Financial Penalties
One of the primary consequences of breaching MAR is the imposition of financial penalties. The FCA can levy unlimited fines on individuals and organisations found guilty of market abuse. These fines are designed to be substantial enough to deter future violations and to reflect the seriousness of the misconduct.
Criminal Sanctions
In addition to financial penalties, criminal sanctions can be imposed for certain types of market abuse, such as insider dealing and market manipulation. These sanctions can include:
- Custodial Sentences: Individuals convicted of insider dealing or market manipulation can face up to 10 years in prison.
- Unlimited Fines: Alongside custodial sentences, courts can impose unlimited fines on those found guilty of criminal market abuse.
Regulatory Actions
The FCA can also take various regulatory actions against individuals and firms, including:
- Public Censure: The FCA may publicly censure individuals or firms, which can damage reputations and impact business relationships.
- Withdrawal or Suspension of Authorisation: Firms may have their authorisation to operate withdrawn or suspended, severely impacting their ability to conduct business.
- Prohibition Orders: Individuals may be banned from performing certain functions within the financial services industry.
Disgorgement of Profits
Another consequence of breaching MAR is the disgorgement of profits. This involves the repayment of any profits gained or losses avoided as a result of the market abuse. This measure ensures that individuals and firms do not benefit financially from their misconduct.
Impact on Employment
For individuals, breaching MAR can have significant career implications. The FCA considers the seriousness of the market abuse and may impose penalties that reflect the individual’s employment status and the benefits derived from their position. This can include fines based on a percentage of the individual’s income or a multiple of the profits made.
Long-term Repercussions
Beyond immediate penalties, breaching MAR can have long-term repercussions for both individuals and organisations. These can include:
- Reputational Damage: Public censure and media coverage of regulatory actions can lead to lasting reputational damage.
- Loss of Investor Confidence: Non-compliance can erode investor trust, making it more difficult to attract investment in the future.
- Operational Disruptions: Regulatory actions such as the suspension of authorisation can disrupt business operations and lead to financial losses.
The consequences of breaching MAR are significant and multifaceted. It is crucial for organisations and individuals to understand their obligations under MAR and to implement robust compliance measures to avoid these severe penalties.
Protection for Employees
The Market Abuse Regulation (MAR) not only aims to maintain market integrity and protect investors but also provides several protections for employees within organisations. Here’s how MAR safeguards employees:
Whistleblower Protections
MAR encourages employees to report any suspected market abuse by providing robust whistleblower protections. These protections ensure that employees can report misconduct without fear of retaliation. The FCA has established clear guidelines and channels for whistleblowers to report suspicious activities anonymously.
Clear Guidelines and Training
MAR requires organisations to provide regular training to employees on market abuse and compliance. This training helps employees understand their responsibilities and the importance of adhering to MAR. By being well-informed, employees can avoid unintentional breaches and feel confident in their roles.
Defined Procedures for Handling Inside Information
Organisations must implement strict procedures for handling inside information. These procedures help employees manage sensitive information correctly, reducing the risk of accidental disclosure. Clear guidelines on what constitutes inside information and how it should be handled protect employees from inadvertently violating MAR.
Protection from Unlawful Requests
MAR protects employees from being pressured into engaging in market abuse. If an employee is asked to participate in or cover up market abuse, they are protected under MAR and can report such requests to the FCA. This ensures that employees are not coerced into illegal activities.
Support from Compliance Departments
Organisations are required to have compliance departments that support employees in understanding and adhering to MAR. These departments provide guidance, answer questions, and help employees navigate complex regulatory requirements. This support system ensures that employees have the resources they need to comply with MAR.
Reduced Personal Liability
By adhering to MAR, employees can reduce their personal liability. Clear policies and procedures help ensure that employees act within the bounds of the law, protecting them from potential legal repercussions. This creates a safer working environment where employees can perform their duties without undue risk.
In summary, MAR provides a framework that not only protects the market and investors but also safeguards employees by offering whistleblower protections, clear guidelines, and support systems. These measures help create a compliant and ethical workplace where employees can thrive.
How Safecall Can Help with MAR Compliance
Ensuring compliance with the Market Abuse Regulation (MAR) is essential for maintaining market integrity and protecting both investors and employees. An external whistleblowing solutions provider like Safecall can significantly aid organisations in meeting their MAR obligations. Safecall offers anonymous reporting channels, enabling employees to report suspicious activities without fear of retaliation. This encourages more employees to come forward with information about potential market abuse, ensuring that issues are identified and addressed promptly.
As an external provider, Safecall conducts independent and impartial investigations into reported incidents. This helps maintain objectivity and ensures that all reports are handled fairly and thoroughly, which is crucial for maintaining trust in the whistleblowing process. Additionally, Safecall provides comprehensive reporting and monitoring tools that help organisations track and manage whistleblowing reports. These tools offer valuable insights into potential compliance issues and help organisations identify patterns of misconduct, enabling them to take proactive measures to prevent market abuse.
Safecall also offers training and awareness programs to educate employees about MAR and the importance of compliance. These programs help foster a culture of integrity and transparency within the organisation, ensuring that employees understand their responsibilities and the procedures for reporting suspicious activities. By partnering with Safecall, organisations can ensure they are compliant with legal and regulatory requirements related to whistleblowing.
Implementing an external whistleblowing solution like Safecall enhances corporate governance by promoting ethical behaviour and accountability, thereby improving overall organisational integrity and stakeholder trust.
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