Change to UK Insider Dealing Laws: A Step Towards Coherence

On 17 April 2023, HM Treasury (HMT) published the draft Insider Dealing (Securities and Regulated Markets) Order 2023 (the Order) and an explanatory memorandum.

The Order brings the list of securities captured under the criminal insider dealing regime in the Criminal Justice Act 1993 (CJA) broadly in line with the administrative market insider dealing and unlawful disclosure of inside information regimes in the UK Market Abuse Regulation (MAR).

Although the list of securities under the CJA regime will expand, the alignment will help compliance and other professionals charged with explaining and policing potential insider dealing within companies with listed UK securities and regulated firms that trade in or manage those securities.

Of note for US and other non-UK firms, the Order does not extend the territorial scope of the CJA to align it with MAR: for insider dealing in listed UK securities to be a criminal offence in the UK, it will still have to take place in the UK. A person can be guilty of insider dealing in listed UK securities under MAR even if the conduct occurs outside the UK.

The Order will enter into force 21 days after the day on which it is made, which on current Parliamentary timetables is likely to be during Q3 2023.

UK regulated firms should update their compliance manuals/policies to reflect these changes once the Order is made.

As currently drafted, the Order will:

• Replace the list of securities in Schedule 2 of the CJA with a new list set out in Part 1. This list is the same as that in Part 1 of Schedule 2 to the Financial Services and Markets 2000 (Regulated Activities) Order 2001, which retained the list of financial instruments in the EU Market in Financial Instruments Directive in UK law. This includes transferable securities, such as shares and bonds; derivatives, such as futures, options, and credit default swaps; and units in collective investment undertakings.
• Specify that a security that falls within Schedule 2 of the CJA must be traded on a specified trading venue or that its price or value must be linked to such securities. The venues are UK-, EU-, or Gibraltar-regulated markets; multilateral trading facilities; and organised trading facilities. The effect of these provisions is to align the markets with those to which MAR applies. In addition, NASDAQ and the SIX Swiss Exchange remain within scope of the CJA, and NYSE is added. This replaces the current list of exchanges, which is out of date.

To discuss the contents of this alert, please contact the authors or your usual Goodwin contact.