Key Definitions: Market Abuse Regulations

Key Definitions

• "Deal": Includes conveying or giving instructions to deal.
• "Executive director": A person appointed as such in terms of section 85(12).
• "Inside information": Specific or precise information not made public, obtained or learned as an insider, and likely to materially affect the price or value of a security if made public.
• "Insider": A person possessing inside information, such as a director, employee, or shareholder of an issuer of securities on a regulated market, or someone with access to such information due to employment, office, or profession, or someone who knows the direct or indirect source of the information.
• "Market abuse rules": The rules made under section 84(2)(f).
• "Market corner": Any arrangement, agreement, commitment, or understanding involving the purchase, sale, or issue of securities listed on a regulated market, where a person or group acquires beneficial ownership or control, or can influence the price of those securities.
• Also where the arrangement affects or is likely to affect the trading price of the securities on a regulated market.
• "Person": Includes a partnership and any trust.
• "Regulated market": Any domestic or foreign market regulated by the laws of the country in which it operates for dealing in listed securities.
• "Insider Trading": Relates to the sale or purchase of shares by insiders who possess inside information, which, if generally known, would affect the share price.

Market Abuse

• Encompasses three prohibited forms of conduct under the Financial Markets Act.
• Insider trading is one form
• Prohibited trading practices (market manipulation) is another form
• False, misleading, or deceptive statements are other forms

Insider Trading Offenses

• An "insider" who has inside information is prohibited from dealing directly or indirectly or through an agent for their own account, in the securities listed on a regulated market.
• Or in derivative instruments related to such securities, to which the inside information relates, or which are likely to be affected by it, is prohibited.
• It is not an offense for the Insider if they became an insider AFTER giving an instruction to deal.
• IT is not an Offense if all the trading parties possessed same inside information

Prohibited Trade Practices

• No person may knowingly use practices that create a false or deceptive appearance of demand, supply, or trading activity, or an artificial price for a security, for their own account or on behalf of another.
• Persons who reasonably should know they are participating in such practices may not do so.

False Statements Concerning Securities

• Making false or misleading statements, promises, or forecasts about securities traded on a regulated market or the performance of a company whose securities are listed is prohibited.
• This includes omitting material facts.
• Individuals who make statements later found to be false, misleading, or deceptive must promptly publish a full correction.

Sanctions for Market Conduct Offenses

• Penalties for insider trading, prohibited trading practices, or making false or misleading statements include:
• The equivalent profit gained or loss avoided.
• A fine of up to ZAR1 million, adjusted annually for inflation, plus three times the amount of the profit gained or loss avoided.
• Interest
• Covering the costs of the suit
• Covering a commission or consideration

Market Manipulation

• Trade-based market manipulation involves actions that send out false or misleading signals to influence the prices of financial instruments.
• Trade based manipulation includes executing transactions as well as placing, cancelling, and modifying orders.
• Information-based market manipulation involves disseminating false or misleading information through media.

Publication Definition

• Information is considered "made public" in the following circumstances:
• The information is published according to the rules of the relevant regulated market.
• Has the ability to be readily aquired by those likely to deal in listed securities.
• The listing relates directly to the info.
• Related to the issuer of the info
• Derived from information which has been made public.

Prohibited Trading Practices

• It is prohibited to knowingly participate in practices that create a false appearance of demand, supply, or trading activity, or maintain artificial prices
• Price-stabilizing mechanisms regulated by exchange rules or listing requirements does not constitute a practice which creates an artificial price

False, Misleading Or Deceptive Statements, Promises and Forecasts

• Directly or Indirectly making false or misleading comments on securities is prohibited for those traded in a regulated Market
• The common law principles of vicarious liability apply to the liability established by this section.
• The guilty will be subject to an administrative fee.