Does the EU Market Abuse Regulation apply to US persons?

Hypothetical: 

ABC Limited is a real estate firm based in New York. The COO of ABC Limited tells his old school-friend over a round of drinks late one evening in a Manhattan private members’ club about a confidential transaction whereby ABC Limited is on the verge of signing an agreement to acquire High Spec Properties plc which is listed on both the New York Stock Exchange and the London Stock Exchange. The COO recommends that his friend buy shares in High Spec Properties plc as he says the shares are “going to go through the roof” once the transaction is publicly announced soon.

Key Considerations:

Legal Risk

  • The Market Abuse Regulation (MAR) creates offences of insider dealing whilst in possession of inside information and unlawful disclosure of inside information in relation to financial instruments in shares with either a primary or secondary listing on an EU stock exchange or other regulated EU trading venue
  • As shares of High Spec Properties plc are listed on the London Stock Exchange, MAR is applicable regardless of the jurisdiction in which the offending activity occurs
  • The information disclosed by the COO would meet the definition of inside information under MAR as it is precise, has not been made public, relates directly to the shares of High Spec Properties plc and if made public is likely to have a significant effect on the price of its shares
  • The COO has made an unlawful disclosure of inside information under MAR as High Spec Properties plc is listed on the London Stock Exchange
  •  The COO has also recommended that his friend should engage in insider dealing which is also an offence under MAR
  • The friend will commit the offence of insider dealing under MAR if he buys the shares as there is a rebuttable presumption under MAR that where a person has inside information and acquires or disposes of financial instruments such as shares (or attempts to do so) he has used that information
  • The Financial Conduct Authority has jurisdiction to take action  for a breach of MAR against both the COO and his friend even though the acts occurred outside the UK

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