Regulation and compliance
Suitability requirements with respect to the distribution of complex financial products
The International Organisation of Securities Commissions (IOSCO) has published a Consultation Report entitled Suitability requirements with respect to the distribution of complex financial products (the Consultation Report).
The Consultation Report has been produced following concerns regarding the assessment of customer suitability in relation to the distribution of complex financial products arising out of and in connection with recent market turmoil. It also supports the call by the G20 for action to review business conduct rules.
The Consultation Report sets out proposed principles relating to customer protections, including suitability and disclosure obligations, which relate to the distribution by intermediaries of complex financial products to retail and non-retail customers.
The analysis in the Consultation Report distinguishes between the customer protections, including suitability/appropriateness/know your customer related standards, arising from the different types of selling related services (advisory and non-advisory business) and the degree of customers’ sophistication (retail and non-retail customers). As part of its work in developing the Consultation Report ISOCO carried out work in order to ascertain what criteria its members deem appropriate for applying these standards to both retail and non-retail customers and has considered how firms implement appropriate customer protections, including suitability, know your customer and disclosure requirements, in order to assess whether a product is adequate or appropriate to a specific customer.
The deadline for comments on the Consultation Report is 21 May 2012.
View Suitability requirements with respect to the distribution of complex financial products, 21 February 2012
Publication of an update to the Q&A on Money Market Funds
The European Securities and Markets Authority (ESMA) has updated its Q&A on Money Market Funds.
The purpose of the Q&A is to promote common supervisory approaches and practices in the application of the guidelines on a Common Definition of European Money Market Funds developed by the Committee of European Securities Regulators by providing responses to questions posed by the general public and competent authorities.
The updated Q&A contains two new questions, 15 and 16‚ which cover the use of credit ratings provided by credit rating agencies and corrective actions to be taken by management companies.
View Publication of an update to the Q&A on Money Market Funds, 21 February 2012
Regulation adopted on short selling and credit default swaps
The Council of the European Union has issued a press release stating that it has adopted the proposed Regulation on short selling and certain aspects of credit default swaps. The Regulation introduces common EU transparency requirements and harmonises the powers that regulators may use in exceptional situations where there is a serious threat to financial stability.
Adoption of the Regulation follows agreement reached with the European Parliament in first reading on 18 October 2011, and subsequent approval by the Permanent Representatives Committee on 10 November 2011.
The Regulation should be applicable from 1 November 2012.
View Regulation adopted on short selling and credit default swaps, 21 February 2012
Consolidated version of FSMA
In June 2011, the Treasury produced a consolidated version of the Financial Services and Markets Act 2000 to illustrate how it would be amended by the draft Financial Services Bill.
The Treasury has now updated this document to show the proposed changes to FSMA as at the Bill’s introduction. The changes are marked in the following ways:
- Inserted and substituted text is underlined.
- Repealed text is either struck through or where whole sections are repealed, this is shown as a dotted line.
View Consolidated version of FSMA, 23 February 2012
FSA enforcement
The FSA has obtained an interim injunction against Stuart Mudge and Anthony Lewis regarding their involvement in the Churchgate Trading Syndicate (Churchgate). The injunction prevents the two men from accepting any further investments into Churchgate and assets belonging to both men have been frozen. It appears that since September 2010, Mr Mudge and Mr Lewis have accepted approximately £5m from UK investors by promising a guaranteed return generated by trading in spread betting. The FSA is concerned that Mr Mudge and Mr Lewis may have been engaging in these activities without the necessary approval from the FSA, without which investor funds may have been put at risk (as investors may not claim compensation from the Financial Services Compensation Scheme or make a complaint to the Financial Ombudsman Service).
View FSA Final Notice - Stuart Mudge and Anthony Lewis, 21 February 2012
The FSA has obtained a court order against Monobank Plc (Monobank) for €77,000. Monobank provided promotional literature stating that it was in the final stages of setting up a prepaid credit card service in the UK and Europe and had entered into commercial agreements to that effect. However, the FSA found no evidence to suggest that any of this was true. The court ruled that Monobank was complicit in offshore boiler rooms, cold calling UK consumers and offering them shares in the firm. The €77,000 will be used to redress victims of the scam.
View FSA Final Notice - Monobank Plc, 17 February 2012
Santander UK PLC (Santander) has been fined £1.5 million for breaches of Principle 2 (Skill, care and diligence) and Principle 7 (Communications with clients) and Rule 6.1.16 in COBS in connection with its sales of structured products. Between 1 October 2008 and 6 January 2010 Santander failed to: (i) deal appropriately with the issue of the scope of Financial Services Compensation Scheme (FSCS) cover over its structured products; and (ii) provide investors with clear information regarding the scope of cover available from the FSCS in relation to its structured products. As a result, there was a risk that investors' decisions to invest in Santander’s structured products were based on insufficiently clear information regarding the scope of cover offered by the FSCS. During the relevant period, sales of Santander’s structured products totalled £2.743 billion. The FSA felt Santander's breaches to be serious as, amongst other things, the investors in these structured products may have included some with no or low appetite for risk or no or little previous investment experience. In addition, following the onset of the financial crisis in September 2008, Santander ought to have been on notice of the increased importance of the issue of FSCS cover to investors
View FSA Final Notice - Santander UK PLC, 16 February 2012
Andrew Jon Osborne has been fined £350,000 for engaging in market abuse as a result of his behaviour between 9 and 11 June 2009. In June 2009, Mr Osborne was a Managing Director in the Corporate Broking group of Merrill Lynch International (MLI). In May and June 2009, Mr Osborne led the corporate broking team at MLI in acting for Punch Taverns Plc (Punch) as joint book runner and co-sponsor in relation to a transaction to issue new equity. On 9 June 2009, Mr Osborne and Punch management had a call on a non wall crossed basis with, amongst others, Mr Einhorn, the owner, President and sole portfolio manager of Greenlight Capital Inc (Greenlight) which manages various entities (the Greenlight Funds), several of which had shareholdings in Punch (the Punch Call). The FSA states that on the Punch Call Mr Osborne disclosed inside information that Punch were at an advanced stage of the process of issuing new equity, probably within a week. Following the Punch Call, Mr Einhorn directed that Greenlight traders sell the Greenlight Funds entire shareholding in Punch.
View FSA Final Notice - Andrew Osborne, 15 February 2012
Abu Dhabi: Changes to the Saudi Arabian Listing Rules
The Saudi Arabian Capital Market Authority (CMA) has issued new listing rules (the Rules) which took effect on 22 January 2012. The new rules codify existing CMA practice and seek to establish new standards for transparency.
Key changes include:
- A foreign issuer may cross-list its securities on the Tadawul at the CMA’s sole discretion and provided that the rules of the market in which the issuer has its primary listing are at least equivalent to the Rules. At present, the CMA has not issued any guidance as to which regulatory regimes will be considered equivalent.
- Customised requirements for the listing of securities other than debt and equity have been added to the Rules. Eligibility requirements specific to real estate companies have been added and the Rules address the issuance of debt programmes in tranches.
- Specific regulations concerning capital increases have been added with an emphasis on the use of proceeds resulting from the rights issue.
- Directors of an issuer must make a specific declaration that funds raised will be utilised as set out in the prospectus.
- All offers of securities must be fully underwritten and the underwriters must comply with CMA prudential rules.
- A financial advisor and a law firm must both be appointed and provide certain prescribed confirmations to the CMA upon listing of securities (including, in the case of the financial advisor, a confirmation that the issuer has established adequate controls and processes to allow the issuer to comply with the Rules). The financial advisor and law firm must be independent of the issuer and must be retained for a period of 12 months following the date of listing to advise the issuer of its continuing obligations under the Rules.
- There is no specified grace period for issuers to comply with the Rules.
For further information please contact Darran McGlinchey.
France: AMF implements transaction reporting on OTC derivative instruments in anticipation of EMIR and MiFID II
In anticipation of the entry into force of the European Market Infrastructure Regulation (EMIR) and MiFID II, the French securities regulator (the Autorité des Marchés Financiers or AMF) has decided to extend existing transaction reporting requirements to over-the-counter (OTC) equity derivatives and credit derivatives (including sovereign CDS) effective 1 January 2012. This new requirement may‚ however‚ be applied from a date later than 1 January 2012 by those operators that need to upgrade their IT capabilities, provided it is applied retroactively to earlier transactions.
Up until 1 January 2012, French authorised investment firms and French branches of EEA investment firms were only required to report to the AMF transactions on financial instruments admitted to trading on a regulated market or on NYSE Alternext Paris.
The extended transaction reporting regime also covers OTC equity derivatives and credit derivatives whose value depends on that of a financial instrument admitted to trading on an EEA regulated market or on NYSE Alternext Paris.
The AMF has amended its Rulebook and revised its Instruction 2007-06 on reporting to the AMF information on transactions on financial instruments by investment services providers and branches to this effect. In so doing, the AMF opted in CESR Guidance 10-661 (How to report transactions on OTC derivative instruments), thus allowing the exchange of transaction reports among EU national regulators.
For further information please contact Roberto Cristofolini or Anselme Mialon.
France: Large-sized financial intermediaries are now required to set up a compensation committee
Legislation has recently been introduced that requires credit institutions, investment firms and private equity investment companies to set up a compensation committee when the size of these entities exceeds a given threshold. The compensation committee's role is to review annually the compensation policy of the entity.
The threshold has been set by way of a government decree at EUR 10 billion of total assets, whether on a consolidated or unconsolidated basis, with immediate effect. Given the size of the threshold it is expected that only about twenty institutions, exclusively banks, are required to set up a compensation committee.
While companies managing UCITS are not targeted by this new requirement, French professional associations have made it clear that their compensation policy should be reviewed by their special committees where they have been set up. In addition, the Alternative Investment Fund Managers Directive provides that alternative investment fund managers that are “significant” in their size or the size of their alternative investment fund, their internal organisation and the nature, scope and complexity of their activities, will also be required to establish a compensation committee.
For further information please contact Roberto Cristofolini or Anselme Mialon.
France: French authorities lift the ban on taking covered short sales on a number of French securities of the financial sector
Last summer, the French securities regulator (the Autorité des Marchés Financiers or AMF) had implemented a temporary ban on taking covered short sales in connection with a number of credit institutions or insurance companies listed on the French regulated market NYSE Euronext Paris. As required by law, this ban had been extended by the French Minister of the Economy. However, the temporary ban has now been lifted. As a result, covered short positions on such securities are again permissible subject to a number of reporting requirements, which for the most part anticipate the entry into force of the EU Regulation on short selling and certain aspects of credit default swaps.
For further information please contact Roberto Cristofolini or Anselme Mialon.
France: Changes to banking intermediary status due to come into force shortly
As previously reported, legislation has recently been introduced that requires banking intermediaries (intermédiaires en opérations de banque et services de paiement) to comply with a number of new requirements. Certain draft government decrees had been published for consultation to further clarify the new regulatory regime. The government decrees have now been finalised and are due to come into force shortly.
A banking intermediary conducts the business of assisting with the conclusion of a banking transaction and/or carries out preparatory work for its achievement but may not effect such transactions.
In essence, banking intermediaries will be required to register on a master list which encompasses all sorts of intermediaries (financial advisors, insurance brokers and tied agents).
Banking intermediaries are now divided into four subcategories: (i) brokers acting by virtue of a mandate delivered by a client (and that may not act by virtue of a mandate delivered by a credit institution), for example to search for the best possible credit offer for this, by setting credit and payment establishments in competition; (ii) intermediaries acting by virtue of an exclusive mandate delivered by a single credit institution; (iii) intermediaries acting by virtue of non-exclusive mandate delivered by several credit institution; and (iv) intermediaries carrying out all of the above.
Under the current regime, no authorisation or registration is required in order to act as a banking intermediary. In contrast, banking intermediaries will be required - to varying degrees depending on the sub-category they fall within - to possess a financial guarantee, professional competence, liability insurance and to comply with a number of conduct of business rules inspired by MiFID.
The above provisions are planned to take effect within the three months following the implementation of the intermediaries’ master list, which date has still not been set with certainty.
For further information please contact Roberto Cristofolini or Anselme Mialon.
Hong Kong: HKMA revises requirements for investment product offerings to private banking customers
On 20 January 2012, the Hong Kong Monetary Authority (HKMA) published a revised version of its “enhanced measures to the sale of investment products". The “enhanced measures” were originally published on 8 January 2009 as recommendations made in the HKMA’s Report on Issues Concerning the Distribution of Structured Products Connected to Lehman Group Companies. These recommendations were required to be implemented by authorised institutions in a circular dated 9 January 2009, with details of the implementation published on 25 March 2009.
The revised requirements apply to dealings between “private banking customers” and authorised institutions (AIs) operating as private banks or with dedicated private banking unit’s private banking customers. For these purposes, “private banking customer” is defined by the HKMA as a person maintaining a personalised relationship with the AI, who receives personalised banking or portfolio management services from the AI and has assets under the AI’s management of at least US$1 million. However, the HKMA expects this financial threshold to be observed reasonably and, in exceptional circumstances, will allow private banks to have clients below US$1 million.
Given the differences between private banking and retail customers, the changes set out in the revised requirements include, inter alia:
- The separation of the customer risk profile assessment from the sales process is no longer mandatory when dealing with private banking customers.
- Documenting the basis upon which a product is considered suitable for a private banking client may be permissible as an alternative to audio-recording.
- Private banks are excepted from introducing a mystery shopper programme.
- Steps to ensure clearer differentiation between traditional deposit-taking activities and retail securities business is no longer necessary.
Despite these revisions, private banks are still expected to ensure that adequate controls are in place for the sale of investment products and comply with relevant regulatory codes and guidelines, including the Code of Conduct for Persons Licensed by or Registered with the Securities and Futures Commission.
The new measures for private banks are expected to be implemented no later than 20 May 2012.
Hong Kong: Relevant Hong Kong Authorities publish guidelines on AML and CTF ahead of the introduction of the Anti-Money Laundering and Counter Terrorist Financing (Financial Institutions) Ordinance
Both the Hong Kong Securities and Futures Commission (SFC) and the Hong Kong Monetary Authority (HKMA) have issued new guidelines on anti-money laundering (AML) and counter-terrorist financing (CTF).
The guidelines assist licensed corporations and authorised institutions, respectively, to comply with the requirements under AML and CTF legislation and regulations in Hong Kong, following the introduction of the Anti-Money Laundering and Counter-Terrorist Financing (Financial Institutions) Ordinance (AMLO). The guidelines will take effect on 1 April 2012 at the same time as the AMLO.
Although the guidelines are not subsidiary legislation and failure to comply with them will not, in itself, lead to judicial or other proceedings, it should be noted that they are admissible as evidence in any court proceedings. Furthermore, under the AMLO, if any provision in the guidelines appears to be relevant to any question arising in any court proceedings, they must be taken into account when determining that question. As such, although not statutory in nature, the guidelines carry considerable weight and financial institutions should adhere to them closely.
The SFC guidelines will replace the SFC’s existing Prevention on Money Laundering and Terrorist Financing Guidance Note, and the HKMA guidelines supersede its Guideline on Prevention of Money Laundering, and Supplement to the Guideline on Prevention of Money Laundering and Interpretative Notes.
For further information please contact Charlotte Robins or David Lee.
Italy: Long awaited regulations on financial intermediaries finally taking shape
Introduction
The Bank of Italy has recently published a consultation document relating to new Regulations which would result in significant changes to the laws that currently regulate the activities of financial intermediaries in Italy (financial intermediaries being financial instituitions within the meaning of the Capital Requirements Directive).
The proposed Regulations would align the Italian legal framework on credit and financial institutions with the principles introduced pursuant to the Capital Requirements Directive.
New rules on financial intermediaries were first introduced in a legislative decree enacted in August 2010 (Legislative Decree n. 141), which largely amends the Italian Consolidated Banking Act (also referred to as Legislative Decree n. 385 of 1 September 1993). The main objective of the proposed new Regulations is to strengthen the overall stability of the Italian financial system.
Operators in the financial services sector are invited to study and send comments to the Bank of Italy on the consultation document by mid-March 2012.
The text of the proposed new Regulations is expected to be adopted and come into force by the end of September 2012.
Main features of the proposed new Regulations
Some of the main features of the proposed new Regulations are:
- A reduction in the number of so-called “licensed activities”, which would be limited for the most part to lending and servicing operations. However, financial intermediaries could apply for specific authorisation to offer payment services, issue e-money and offer other types of financial services to clients.
- The establishment of a single register for financial intermediaries to be kept by the Bank of Italy. This single register would substitute the current dual-register system, which provides for a general register for “simply registered” financial intermediaries and a special register for financial intermediaries which require “supervision”.
- More stringent requirements for the authorisation, ownership and structure of financial intermediaries. For example, prior to granting authorisation, the regulator will look at the “honesty and professional profile” of the applicant’s shareholders and managers as well as the applicant’s business plan. This will allow the regulator to better assess the risks related to the applicant’s business.
- New minimum capital requirements equal to € 2 million for companies engaging only in lending activities and € 3 million for companies engaging in lending activities as well as providing guarantees, as compared to respectively € 600,000 and € 1,500.000, required by the current regulations.
- A new regime for consolidated supervision applicable in case of a financial group, composed of financial intermediaries and its subsidiaries with greater responsibility on the part of parent companies for the activities of branches performing financial intermediary activities in Italy.
- Specific rules for financial intermediaries relating to corporate governance, risk control, risk management, internal flow of information, administrative and accounting procedures and measures to ensure business continuity and disaster recovery. In particular, as regards corporate governance, the roles and responsibilities of the company’s management team and statutory auditors must be clearly defined. So-called “control functions” (i.e. risk management, compliance and internal audit) must be independent and only small entities (defined as those financial intermediaries belonging to class 3 of the ICAAP rules with total assets not exceeding € 100 million, unless they are parent companies of a financial group, are engaged in deposit operations through securities, securitisation transactions or are authorised to provide payment services, investment services, or issue e-money) will be allowed to delegate more than one of these functions to a single officer or manager. Outsourced activities will also be evaluated. In sum, the rules relating to financial intermediaries will become very similar to those currently imposed on banks.
- A new obligation to monitor exposure to liquidity risk on an ongoing basis.
The proposed new legal framework also allows financial intermediaries to acquire shareholdings in other companies in order to develop their business, but not without limitation. To this extent, the consultation document introduces specific provisions, similar to those applicable to banks. In particular, investments in fixed assets (real estate and shareholdings) would be limited to an overall of 60 percent of overall capital investment.
Whilst no such limitation would apply to the acquisition of shareholdings in other financial intermediaries (or companies exercising ancillary activities), the proposed new Regulations impose not only notification obligations but also new authorisation requirements in the event of a proposed acquisition of shareholdings in financial intermediaries. In addition, prior to granting authorisation, the Bank of Italy will analyse the intentions of the acquirer, to ensure that these are honest and part of a sound and prudent management of the business, backed by financial stability. This is an important change in the existing legal framework, which requires only notification to and not authorisation by the Bank of Italy for these types of acquisitions.
The text of the consultation document is available in italian only at:
http://www.bancaditalia.it/vigilanza/cons-pubblica/proc_in_corso/disp_vig_int_fin/docum_cons.pdf
Italy: Repurchase or early repayment by intermediaries of bank securities - Consob clarifies rules of conduct towards clients
Consob, the Italian securities exchange supervisory authority, has published an official communication (Communication no. DIN/12010034 of February 2012) following numerous enquiries which it has received regarding the duties of intermediaries in the context of the repurchase by banks of their securities (subordinated bonds and similar debt securities of any description) (buyback transactions). The buyback transactions in question are generally characterized as offers to "qualified investors" or to the owners of quoted securities having a nominal threshold value of over €50,000 and as such are exempt from the preparation of a prospectus under relevant Italian laws.
Banks often enter into a buyback transaction in order to reduce their debt exposure and improve their capital adequacy position.
In its communication, Consob warned that in order to protect the banks' retail customers and avoid conflicts of interest, certain precautions must be taken prior to a buyback transaction. In particular, Consob stated:
"intermediaries who hold in their custody and administration financial instruments, have a duty to take reasonable action, taking into consideration the duration of the offer to retail investors, to inform all holders of the instruments themselves of the planned buyback, even if the latter cannot directly take part in the offer, about the terms and conditions of the planned transaction."
In addition, Consob stated that, prior to recommending to any client to participate in a buyback transaction, the intermediary has a duty to consider, based on a "rigorous assessment" and "predetermined procedures", whether the recommendation is appropriate and also what the consequences would be should the client not participate in the offer.
Consob further warned that the above-mentioned precautions require special attention and careful application by the intermediary any time the planned buyback transaction may possibly give rise to a conflict of interest with retail clients (chiefly in the event that issuer/offerer belong to the same group of the intermediary) and called on management teams at intermediaries to put in place requisite compliance procedures to ensure "adequate and full implementation" of these conduct of business rules.
The full text of Consob Communication no. DIN/12010034 of 02.09.2012 can be found on the Consob website, at:
http://www.consob.it/main/documenti/bollettino2012/c12010034.htm
Italy: Italian companies face changes to the composition of their corporate boards
The composition of Italian corporate bodies will be extensively modified through both regulatory and legislative intervention
The Italian Decree Law 201/2011, has been amended by Italian Law 214/2011 so that, for the first time, the issue of personal cross holdings within credit and financial markets is regulated. Article 36 of the Italian Decree Law now provides that directors and summit officers operating in the banking, insurance or financial markets are forbidden from covering or exercising similar positions in competing companies. The purpose of the prohibition is to improve competition between companies operating in those markets, neutralizing potential distortions or collusive conduct. Directors and summit officers that currently hold equivalent positions in more than one company operating in those markets are given 90 days to choose which single appointment to continue. In the case of non-compliance with this requirement, the relevant director or summit officer will lose all of their appointments.
In addition, the composition of corporate boards will be further changed as a result of Consob Resolution no. 18098 of 8 February 2012. This Resolution requires listed companies to apply a criterion of gender representation when appointing new members to corporate boards. The criterion provides that a gender which is less represented (usually the female gender) has a right to be represented on at least one third of the seats held on boards of directors and boards of statutory auditors (reduced to one fifth at the first renewal). The provision was first introduced under Italian Law no. 120 of 12 July 2011, which has amended the Italian Consolidated Financial Law, and has recently been introduced in the Italian Issuers’ Regulations pursuant to the above Consob Resolution. Italy is now in line with other Member States, which have all introduced some kind of compulsory quotas.
For further information please contact Nicolo Juvara or Davide Nervegna.
Netherlands: DNB on financial transaction tax: undesirable
On 6 February 2012, the Dutch Central Bank (De Nederlandsche Bank, DNB) expressed its view that the introduction of the European financial transaction tax (FTT) is undesirable. The DNB states that it is doubtful whether the FTT will counteract disruptive market behaviour and that the current proposal will slow down economic growth. The DNB estimates that the FTT would set Dutch banks, pension funds and insurers back € 4 billion per year. According to the DNB, the Netherlands will be relatively severely affected by the FTT on account of its large financial sector, including pension funds. If the FTT is not levied on a global scale, the negative effects in terms of economic growth and arbitrage will be stronger.
The press release (in English) can be found at:
http://www.dnb.nl/en/news/news-and-archive/dnbulletin-2012/dnb267803.jsp
For further information please contact Floortje Nagelkerke
Netherlands: Profit share of investment funds
On 16 February 2012, the Dutch Central Bank (De Nederlandsche Bank, DNB) announced that the total net assets of Dutch investment funds rose by 1.7 per cent quarter on quarter (€ 7.7 billion) to € 474.0 billion in the fourth quarter of 2011. In particular the price gains on equities made a positive contribution to the increase in the net assets, whereas in the third quarter of 2011 net assets declined by 0.3 per cent quarter on quarter due to price losses on equities. The number of investment funds climbed by 12 to 1,468 in the fourth quarter of 2011.
The press release (in English) can be found at:
http://www.dnb.nl/en/news/news-and-archive/statistisch-nieuws-2012/dnb268266.jsp
For further information please contact Floortje Nagelkerke
Singapore: Singapore’s Court of Appeal outlines what constitutes insider trading
The Singapore Court of Appeal (CA) has, for the first time, given a detailed outline of what constitutes insider trading in Singapore.
In the recent case of MAS v Lew Chee Fai Kevin, the CA upheld a High Court ruling against Kevin Lew (Lew), the former chief financial officer of WBL Corporation Limited (WBL). In 2010, the High Court ruled that Lew contravened the insider trading prohibition in section 218 of the Securities and Futures Act. Lew was ordered to pay a civil penalty of S$67,500.
The key facts of the case are that Lew sold 90,000 of his shares in WBL on 4 July 2007, when he was in possession of non-public price-sensitive information about WBL which he had acquired at an internal executive meeting held on 2 July 2007.
In its decision, the CA recognised that an insider trading transaction generally comprises three events:
- The acquisition of inside information by the alleged insider.
- The acting on the inside information by the alleged insider (e.g. by buying or selling the shares of the company concerned).
- The subsequent release of the inside information into the public domain.
Notably, in giving its decision the CA stated that the actual impact that the information had on the market was ‘’relevant but not conclusive’’ in showing that the information was not material. The test was whether a reasonable person would expect the information to affect a common investor, and not to examine in detail what actually happened to the share price later. The CA also opined that the elements of insider trading applied equally to civil and criminal cases.
For further information please contact Daniel Yong or Wilson Ang.
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