UK unprotected by MAD, says CFA Institute

The UK Treasury should maintain its enhanced market abuse protection until the MAD review is complete

LONDON – The UK Treasury is right to propose an extension of its super-equivalent provisions of the UK market abuse regime amid current market conditions, according to the CFA (Chartered Financial Analyst) Institute Centre for Financial Market Integrity. It says HM Treasury’s provisions provide a higher degree of protection than the EU Market Abuse Directive (MAD), which is under review.

Market stress on firms and regulators requires increased vigilance on market abuse, says the CFA Institute Centre, which concludes that wider definitions of market abusive behaviour, proof of such behaviour and the investments included in such behaviour, enable the UK regime to better encompass market abuse than the provisions of the MAD.

The call to maintain a high level of market abuse awareness comes soon after false rumours of concerning HBOS in the UK resulted in short selling of shares shortly afterwards. Adding fuel to the fire, the Financial Services Authority announced in its Market Watch 26 newsletter that 2007 has seen a rise in insider dealing, aided by the increasing use of complex financial instruments.

Charles Cronin, head of the CFA Institute Centre for Europe, the Middle East and Africa, says: “We believe that retaining the super-equivalent provisions of the UK regime is central to ensuring greater investor protection and market efficiency, particularly at a time when market conditions lend themselves to volatile behaviour. The CFA Institute Centre fully supports HM Treasury’s extension proposal and welcomes the opportunity to collaborate with industry peers in upholding the highest standards of ethical and professional behaviour.”