Market Abuse and MAR: A Practical Guide for Regulated Firms
Market abuse obligations have a reputation for belonging to large trading desks. In practice the regime catches a much wider population — wealth managers, corporate finance advisers, brokers, asset managers and anyone handling inside information — and the smaller the firm, the more likely the arrangements are thinner than the obligation requires.
This guide covers what the regime prohibits, which firms are caught, what adequate systems look like at a smaller firm, and where supervisors find gaps.
What the Regime Covers
The UK market abuse regime prohibits three broad categories of behaviour: insider dealing, unlawful disclosure of inside information, and market manipulation. The FCA’s market abuse pages set out its scope and the regulator’s current areas of focus.
Two features make it different from most conduct obligations. It is a civil regime that sits alongside criminal offences, so the same conduct can be pursued through more than one route. And it applies to the behaviour itself regardless of whether the person understood the rules — intent matters for some limbs, but ignorance of the regime is not a defence to it applying.
Inside Information
Inside information is precise information, not generally available, relating to an issuer or financial instrument, which if made public would likely have a significant effect on price.
Each element does work. “Precise” excludes vague market speculation but includes information about a set of circumstances or an event that may reasonably be expected to occur. “Not generally available” is a lower bar than firms assume — information known to a handful of people at several firms is still not public. And the price test is about likely significance, assessed as a reasonable investor would.
Firms that advise on transactions, hold mandates, or sit close to corporate clients will handle inside information routinely. The question is not whether they receive it but whether they recognise when they have.
Which Firms Are Caught
Far more than those that trade. A corporate finance adviser working on a transaction holds inside information. A wealth manager whose client is a director of a listed company may receive it. A broker executing orders sees information about client intentions that engages related obligations.
The practical consequence is that firms outside the obvious population often have no arrangements at all, on the reasonable-sounding basis that they are not a trading business. That is the gap supervisors find, and it is a structural one rather than a failure of a specific control.
Insider Lists
Where a firm acts for an issuer or otherwise holds inside information, insider list obligations arise. The list must identify who has access, why, and from what date and time, and it must be kept current as people are added and removed.
Two failures are common. Lists created at the start of a transaction and never updated as the deal team changes, which means the record does not reflect who actually had access. And lists maintained without the individuals being told what being on one means — the obligation includes making those people aware of the duties and the consequences.
Timing granularity matters more than firms expect. Recording a date without a time is insufficient where the sequence of who knew what, and when, is the question being examined.
Information Barriers
Where parts of a firm hold inside information and other parts do not, barriers need to be real rather than described.
A workable arrangement controls physical and system access, restricts who can be brought across the barrier and by whom, records every wall-crossing with the reason, and is tested. Firms that rely on the small size of the office — the assumption that everyone knows not to discuss things — have a culture rather than a control, and culture is not evidenced in a file review.
Wall-crossing records are the item most often missing entirely. They are also the first thing requested when a question arises about how information travelled.
Personal Account Dealing
Personal account dealing rules exist largely because of this regime, and they are the point where market abuse risk and conduct obligations intersect most directly.
A functioning arrangement requires pre-approval rather than notification after the event, covers accounts the individual controls as well as those they own, includes connected persons, and is reviewed by someone who would notice a pattern. Approval granted by whoever is nearest, without reference to current restricted lists, is a control in name only.
Restricted and watch lists need to drive those approvals automatically, which means they need to be current — a restricted list updated weekly in a business where situations arise daily is not performing its function.
Surveillance and Suspicious Transaction Reporting
Firms arranging or executing transactions have obligations to detect and report suspected market abuse through suspicious transaction and order reports.
Proportionality applies: a small firm is not expected to operate the surveillance infrastructure of an investment bank. It is expected to have arrangements appropriate to its business, to apply judgement to what it sees, and to be able to show how it would identify something.
The test a supervisor applies is usually practical — walk me through how you would spot this. A firm that cannot describe the mechanism has not satisfied the obligation, whatever its policy says.
Disclosure Obligations for Issuers and Their Advisers
Firms advising listed clients sit next to a second set of obligations — the issuer’s duty to disclose inside information as soon as possible, and the conditions under which disclosure can be delayed.
The adviser is not the issuer, but the adviser is frequently the party that notices the obligation has been triggered, and that the client has not acted on it. Where a firm holds inside information about a client that the client has neither disclosed nor properly delayed, it has a problem that is both a market abuse risk and a client relationship question.
The practical control is that someone senior enough to raise it with the client is aware of the position, rather than the knowledge sitting with a deal team that has commercial reasons not to press the point.
Training That Actually Works
Market abuse training is where generic content fails most visibly, because the regime turns on recognising situations rather than on knowing definitions.
Training that works is scenario-based and specific to the firm: here is the kind of information you might receive in your role, here is how you would recognise it, here is exactly what you do in the next ten minutes, and here is who you tell. It should name the person, not the function.
The test of whether it landed is simple and worth running. Ask someone in a client-facing role what they would do if a client mentioned something sensitive on a call tomorrow. If the answer is “I’d check the policy”, the training has not worked.
Where Small Firms Actually Go Wrong
Four patterns recur.
Assuming the regime does not apply because the firm does not trade, which leaves advisory and wealth businesses with no arrangements. Treating a policy as the control, with no insider list, no wall-crossing record and no evidence of anything operating. Personal account dealing approved informally and never reviewed for pattern. And training that explains the law without translating it into what a particular individual should do when they receive something sensitive.
None of these require significant expenditure to fix. All of them require someone to own the area and allocate time to it.
Who Owns It
Market abuse arrangements typically sit with the Compliance Oversight function, with the board accountable for the firm having adequate systems.
Experience matters here more than in most compliance areas, because the judgements are specific — whether a particular piece of information is inside information, whether a pattern of dealing warrants a report — and they are difficult to make without having made them before. A compliance officer whose background is entirely in retail conduct is not automatically equipped for a firm handling inside information, which is worth weighing when hiring.
Frequently Asked Questions
Does MAR apply if we do not execute trades?
The prohibitions on insider dealing and unlawful disclosure apply to anyone handling inside information, whether or not the firm trades. Some obligations, such as transaction reporting of suspicions, attach to arranging and executing activity.
Do we need an insider list if we only occasionally handle inside information?
Where the obligation is triggered, frequency does not change it. Firms handling it occasionally need a process that can be stood up quickly rather than a standing list.
Is pre-approval of personal account deals really necessary?
Approval after execution cannot prevent a problem, only record it. Pre-approval checked against current restricted lists is the arrangement that actually controls the risk.
How much surveillance is proportionate for a small firm?
Enough to detect what the firm’s business could plausibly generate, and capable of being described. The expectation scales with activity, not with ambition.
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About the author
Adrian Lawrence FCA
Adrian is the founder and Managing Director of FD Capital. A Chartered Accountant and ICAEW Fellow, he became a finance director at 28 and has spent more than 25 years at C-suite level, including as finance director of a listed company and of a private equity backed management buy-out. Every search is run by our specialist team, with Adrian overseeing each mandate.
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