Introduction
For years, the UK's approach to insider dealing had a significant flaw: actions that broke civil market abuse rules might not qualify as criminal offences. This created an enforcement headache for regulators and left potential loopholes for market abuse. The Insider Dealing (Securities and Regulated Markets) Order 2023 aims to fix this problem by aligning criminal and civil rules.
Why This Matters
Financial markets rely on fair and transparent trading. When someone trades using inside information - knowledge that isn't available to other market participants - it undermines market integrity and investor confidence. Previously, the UK's split approach between civil and criminal enforcement made it harder to tackle this behaviour effectively.
What's Changed?
The new Order significantly expands the reach of criminal insider dealing laws. Criminal charges can now be brought for insider dealing across approximately 130 regulated markets globally, including major exchanges like NASDAQ and the New York Stock Exchange. The reform also captures 230 alternative trading venues and 75 specialised trading platforms, reflecting the diverse nature of modern financial markets. Importantly, the law now covers a wider range of financial products, including derivatives and exchange-traded funds. This reflects how modern financial markets actually work, rather than being limited to traditional shares and bonds.
Impact on Financial Firms
Financial institutions face significant work to comply with the expanded regime. They must develop more comprehensive monitoring systems that track trading across all relevant markets and financial products. This means updating staff training programmes and revising internal policies to reflect the broader scope of criminal liability.
Strengthening Market Integrity
The reforms create a more coherent regulatory framework by ensuring consistent treatment of insider dealing across civil and criminal law. By closing previous gaps and providing clearer deterrents, the new rules make it harder for bad actors to exploit regulatory differences. This strengthens overall market integrity and helps maintain the UK's position as a leading financial centre.
Looking Ahead
The success of these reforms depends on several factors. Regulators must have sufficient resources to monitor the expanded range of markets effectively. Financial firms need time and investment to update their compliance systems. Perhaps most importantly, market participants must adapt their practices to align with the stricter regime.
Conclusion
These changes represent a significant modernisation of UK financial regulation. They show how the UK is adapting its legal framework to match the reality of today's global financial markets. For everyone involved in financial markets - from traders to compliance officers - understanding and following these new rules is now essential. The reforms mark an important step forward in protecting market integrity and ensuring fair trading for all participants.