22 November 2004

FT: City voices its concerns over abuse directive

Britain’s banks, brokers and investors are embroiled in a row with the government and regulators about the implementation of the European Union’s market abuse directive. The directive cuts across existing UK rules based more broadly on market practice. Banks have argued the directive would add an additional layer of complexity to market regulation.

“It complicates things and complication means a lack of certainty and that is unfortunate,” said Ian Mullen, chief executive of the British Bankers Association. UK rules on insider dealing, introduced in 2001, state that anyone trading when they are in possession of “relevant information not generally available” could be guilty of market abuse. However, the EU definition is narrower, specifying only that traders with “price sensitive” information could be abusing the market.

Banks believe that keeping these two separate rules would be confusing and expensive. Banks and brokers also believe regulators need to exercise their judgment over some types of market behaviour. “Under the existing rules, there are well-known paths and trading patterns that are monitored by the London Stock Exchange,” said Angela Knight, chief executive of the Association of Private Clients Investment Managers and Stockbrokers. “When you start codifying it, you limit the amount of judgment that can be taken.”

Regulators are looking at implementing the EU directive in full and maintaining the existing UK regime as well. The Financial Services Authority has argued that both sets of rules are so intricately entwined with other requirements that it would be difficult to separate out parts for exclusion.

Ministers are due to decide how to implement the EU directive by the end of the year. The row goes to the heart of the debate in the City about the implementation of EU rules.

“It is important to attain congruence with Europe. We don’t want London to be sitting apart,” said Mr Mullen. Many City firms have also urged the government to avoid “gold-plating” the rules with additional UK-specific requirements.

Financial Times 22 November 2004

© Financial Times