Market abuse

{{Short description|Any action which unreasonably disadvantages other investors in a financial market}}

In economics and finance, market abuse may arise in circumstances in which investors in a financial market have been unreasonably disadvantaged, directly or indirectly, by others who:[http://europa.eu/legislation_summaries/internal_market/single_market_services/financial_services_transactions_in_securities/l24035_en.htm EU Legislation Summaries: Market abuse]

• have used information which is not publicly available (insider dealing)
• have distorted the price-setting mechanism of financial instruments
• have disseminated false or misleading information (market manipulation)

Market abuse is split into two different aspects (under EU definitions):

1. Insider dealing: where a person who has information not available to other investors (for example, a director with knowledge of a takeover bid) makes use of that information for personal gain
2. Market manipulation: where a person knowingly gives out false or misleading information (for instance, about a company's financial circumstances) in order to influence the price of a share for personal gain

In 2013/2014, the EU updated its legislation on market abuse,{{cite web |url=http://www.europarl.europa.eu/RegData/bibliotheque/briefing/2013/130440/LDM_BRI(2013)130440_REV1_EN.pdf|author=Willemijn de Jong |title=Tackling financial market abuse in the EU|date=21 January 2013|accessdate=18 December 2013}} and harmonised criminal sanctions. In the 2015 Danish European Union opt-out referendum, the Danish population rejected adoption of the 2014 market abuse directive ([http://eur-lex.europa.eu/legal-content/EN/ALL/?uri=CELEX:32014L0057 2014/57/EU]) and much other legislation.

In the UK, the market abuse directive (MAD) was implemented in 2003 to reduce market abuse. It applied to any financial instrument admitted to trading on a regulated market or in respect of which a request for admission to trading had been made. MAD was subsequently replaced by the Market Abuse Regulation (MAR) in 2016.{{Cite web |date=2016-05-04 |title=Market Abuse Regulation |url=https://www.fca.org.uk/markets/market-abuse/regulation |access-date=2024-10-18 |website=FCA |language=en}}