Blog/ Reporting Suspected Market Abuse: Why It’s Important for your Team to be Knowledgeable and Vigilant
Reporting Suspected Market Abuse: Why It’s Important for your Team to be Knowledgeable and Vigilant
Reporting Suspected Market Abuse
The financial market is particularly susceptible to corruption – with the potential effects of this being devastating. It is particularly important, therefore, that when working within the financial sector such as at an automotive dealership, you remain vigilant about the common forms of financial corruption, including market abuse, reporting suspected market abuse as it arises.
What is market abuse?
Market abuse is defined by the use of information to manipulate the financial market or value of securities (tradable financial assets) for personal financial gain. This can be more specifically divided into two subcategories: insider trading and market manipulation.
Market abuse can harm investors in the financial market, the stability of the financial market, and consumers of the financial market.
An example of market abuse within the automotive dealership industry may appear as a salesman pushing the sale of a certain type of car to consumers, due to knowledge of non-public information which affects the value of this stock. However, it can take many forms at all levels of the automotive industry.
Insider trading, also known as insider dealing, refers to the biased act of buying or selling a public company’s stock or securities under the knowledge of confidential or material non-public information. This is an illegal practice in the UK, since it gives those with insider information an unfair advantage, potentially leading to personal financial gain over those who do not have access to the same information.
Market manipulation is another illegal form of market abuse in the UK. Market manipulation is the deliberate interference with the financial market in order to affect the price of a share. This can involve giving out misleading or false information about the price or demand of a security, in order to influence its value.
Why it is important to be part of a regulated financial system that penalises market abuse?
Under UK MAR (introduced into UK law in December 2020, following Brexit), market abuse is an illegal and punishable practice.
As regulators of the financial market, the Financial Conduct Authority works alongside other regulators and law enforcement to tackle market abuse.
It is important to be part of the FCA regulated markets as an FCA principal firm or appointed representative in order to prevent the disruption of the financial market, and the unfair personal profit of those able to manipulate it.
What steps can members of your team take?
Understanding and being able to recognise the forms of market abuse is the first step your regulated automotive dealership can take.
Understanding how to report market abuse is the second step. This can be undertaken by both individuals and appointed representatives when market abuse arises, with the FCA website providing guidance on who can report suspected market abuse and how to report market abuse.
How to remain vigilant about market abuse
In line with FCA compliance, appointed representatives should ensure employees are trained and supported to the appropriate levels of skill in order to do this.
Principal firms are also accountable for remaining vigilant against market abuse in their networks and ensuring their appointed representatives are fulfilling their duties to remain vigilant against market abuse.
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