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jurisconsulting? October 8, 2010

Posted by Bradley in : consultation , trackback

I think that consultation by policy-makers makes some sense as a means of gathering data about the context in which rules would operate, for example about whether a rule is needed or about how costly it would be to implement. And I understand that sometimes consultation is used for pr rather than to gather data. But I don’t understand why a regulator would use consultation to figure out what the law requires it to do. That seems to be exactly what the FSA is doing in its most recent quarterly consultation with respect to dealing with the implications of the Court of Justice’s December 2009 judgment in the Spector Photo Group Case (Case C-45/08). In that case, the Court ruled on the interpretation of Art. 2(1) of the Market Abuse Directive:

Member States shall prohibit any person … who possesses inside information from using that information by acquiring or disposing of, or by trying to acquire or dispose of, for his own account or for the account of a third party, either directly or indirectly, financial instruments to which that information relates.

The Court held that the directive involved a rebuttable presumption that a person who had inside information actually used it when trading. The FSA concludes that the statutory language in the UK is consistent with this interpretation, but that the language of the implementing rules is not:

MAR 1.3.4 E sets out our opinion that if the inside information was the reason for, or a material influence on, the decision to deal, this indicates that the person’s behaviour is ‘on the basis of’ inside information. This evidential provision suggests we would need evidence of a person’s intention, as a separate element, to prove insider dealing.

So, the FSA proposes to conform its rules to the requirements of Spector. Fair enough. But the FSA goes on to ask:

Do you agree that MAR 1.3.4 E should be deleted in light of the ECJ decision in the Spector case?

So, I want to know what possible relevance the views of respondents to the consultation document has to this question. Is the FSA here merely trying to give advance notice of the change, or is it really consulting on the question? Perhaps it is trying to save money on legal advice?


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