Criminal market abuse regime review completed by the FCA & HM Treasury

The Financial Conduct Authority (FCA), the UK financial regulator, and HM Treasury have completed a review (‘the Criminal Regime Review’ or ‘CRR’) of the criminal market abuse regime applicable to financial market activities conducted in the UK. Their joint statement regarding the review can be found here. The review identified several areas where the UK government believes it would be appropriate to update the criminal sanctions regime.

The CRR was undertaken within the wider context of regulatory reform in UK financial services, known as the Future Regulatory Framework (FRF) review. The FRF review was aimed at understanding what the UK’s new position should be outside of the European Union post-Brexit and ensure that the regulatory regime is fit for the future. As part of this, the UK government plans to repeal the Market Abuse Regulation (which was transposed into UK law), and replace it with new, UK-specific legislation. They plan to agree a timetable for this in the near future.

 RegTrail Insight

The UK government’s desire to recast the Market Abuse Regulation regime following Brexit will not come as a surprise to many. Pre-MAR/MAD 2, the UK already had a comprehensive and durable market abuse regime in place under the Financial Services and Markets Act (FSMA 2000) which covered energy and commodity derivatives - this was not the case for in all EU member states. The UK was exempt from implementing MAD 2 (the criminal sanctions element of the recast regime) into UK law given, amongst other things, the strength of the local regime.

It is not clear what pathway the UK will ultimately take although significant deviations from the EU regulation seem relatively unlikely. That said, any type of regulatory divergence form the EU will serve to complicate compliance programmes for firms straddling both regulatory jurisdictions. A prospect which is likely to increase over time for many regulations.