Market manipulation - EU-law regulation of the stock market

Student thesis: Master thesis (including HD thesis)

  • Jonathan Vincent Jalk
The regulation of market abuse in legislation is a fairly new area. It’s only 30 years ago that the EU started to increase their focus on this. Since then there has been a lot of legislation to maintain the security, clarity and competiveness of the markets in the EU. Some of this legislation has been coming from EU through directives; as is the case with the market abuse directive. This directive has shaped the way EU has been dealing with market abuse for over a decade. It has been accomplished by implementation into the national laws of all EU member states. Since then, this has been replaced by the Market Abuse Regulation (MAR). A regulation from the EU, unlike a directive, doesn’t need implementation, but is instead in effect from the moment it has been realized. It will usually not need to be implemented, but it can have areas of it that each member state needs to implement. Regulations are therefore good at creating harmonized legislations between the member states. In an area like the open markets this is extremely important since this helps creating the security and competitiveness, which is required for a big collective market. There is still room for special rules too, through market praxis. The regulation allows each market to have its own praxis; this is however done under a list of requirements that are set in place to protect the markets from abuse.

This thesis has focused on the ability for a member state to shape the legislation on market abuse, to a point that is beyond what the legislation from EU has intended. The first real answer is that it’s extremely hard to do so now that MAR is in place, since the member states now have little to no say in how the rules around market abuse are put. So the question has been broadened to also look into the possibilities which were before MAR. Beforehand it is still supposed to line up with the directive, but this isn’t always the case, and then the EU needs to rein the member states back in line.

In this thesis there has been a discussion of a particular area in the Danish legislation that did not share the same wording as the directive did. There’s a list of signals that must be taken into consideration when looking at market abuse. This was however written as a “can” in the Danish legislation. Through case law it appears as if the Danish legislation is to be understood as “shall”, since it is argued that the way it is expressed in the directive must be correct.

Among the areas covered in this thesis are some unwritten principles such as the criterion of importance and unlawful reservation. The criterion of importance was part of the former Danish law but has since been changed. The point is to protect people in situations, where their actions have not been able to make an important difference. With the removal of this, there is no written limit to how small an abuse can be. In the thesis it is argued that there might still be a criterion of importance. The unlawful reservation is seen in case law, and is made to protect people who find themselves accused of market abuse, when their actions have been legal. The point of this criterion is to maintain a fair trial for people, and not convicting people who might be included, because the legislation has gone too far.

The capability criterion has also been covered. The focus here is to not stop the definition of market abuse at someone successfully doing some sort of abuse; with this criterion it’s enough that the actions are capable. This increases the security of the market and also helps inforce more professional behavior.
The discussions and analyses made in this thesis has been done with Danish, EU and foreign legislation and case law, as to understand both the EU legislation as a whole, but also the Danish compared to other member states.
LanguageDanish
Publication date31 May 2017
Number of pages48
ID: 279407330