Public concerns and interest is actually the insider trading which is the result of 2007 financial crisis. There were two very famous novels published that represented the today’s society and values, and they presented the facts also, they gave a different impression of the regulators (Financial Services Authority).

This article tells what exactly is the insider dealing and market abuse and why they are crime, how are they regulated in UK and also to evaluate the performance of FSA.

Market abuse is a very simple term that can be described as the acts in which are held in markets that unfairly taking advantage of the investors, such as giving them wrong information about the company’s performance. So that is actually misleading them and taking advantage out of it. This eventually distorts and damages the interest of the market participants.

It is the duty to provide the reliable information to the investors in order to encourage the investments and only then the investors will fund different companies and businesses.

Market abuse and insider dealing are morally wrong and are considered as crime against society and individuals. This can also be said that this is defrauding and stealing from investors.

Basically insider dealing is like if someone inside the company owns the shares of the company and they buy or sell the shares when as an insider they get to know that the price of the share is going to go up to its going to go down. So this all comes under Criminal Justice Act 1993 Section 53.

Share Ramping or Pump and Dump is know as inflating share price in order to make profits by broadcasting wrong information on the internet, notice boards and emailing investors the false information to push the share price.

The fraudster can also release the wrong information to force the share price down which is known as Trash and Cash and can gain the opportunity to make profit.

Front running is also a type of insider dealing that affects the share price by purchasing or selling the shares on advance knowledge.

This case also gives an example of Asif Butt who is former vice president of compliance at Credit Suisse First Boston. He was found guilty of using confidential information about clients that was price sensitive relating to the status and performance of the company. Mr Butt fed the information to friends outside the bank who either bought shares or placed spread bets. The total profits made were estimated at £388,488 and losses at £100,681, the net gain being £287,807 in which Butt’s share was more than £237,000.

There is another similar example in which David Gray, a stockbroker, William Liggins, a fund manager, Catherine Rowlands, an investment analyst, and Mark Riding, a fund manager passed insider information between themselves.

To ensure that there is a fair market in a company’s share and everyone has same information about the buying, selling and holding of the shares decisions, there was a legislation that was formed to ensure all this. In order to achieve this the price sensitive information was minimized to the public and all the information was properly regulated through information service.

Early in 1980s, insider dealing was not made unlawful but under CJA it is unlawful for an individual to deal in stocks or shares with inside information which would be likely to have a significant effect on their price..

Although it has yet to be used for this purpose, market abuse and insider dealing are also likely to be found unlawful under the Fraud Act 2006 which became law in January 2007 and the new general offence of fraud, which can be committed in three ways: by false represen- tation, by failing to disclose information, and by abuse of position. The insider person was actually making a gain for himself or another, and/or was causing loss to another.

Market abuse is made a criminal offence under Section 397 of FSMA. This section makes it unlawful for a person to make a statement, promise or forecast which he knows to be misleading, this person can not dishonestly conceal any material facts whether in connection with a statement.

From 1981 till 2010, there were total 30 such cases in which the Advisor was found guilty 13 times, director was found guilty 4 times, there were 6 cases in which information from director was the cause, 3 case were in which Regulators or information from them was found guilty and 2 cases were in which the person who was guilty was not known.

Clearly, insider dealing and other forms of market abuse undermine the efficiency of the stock market. This would lead to a belief that the stock market is unfair allowing investors with inside information to take advantage. Further, companies and individuals are able to manipulate the market. Both forms of market abuse discourage investors and investment to regulate against such behaviour.

Although insider dealing was made unlawful as long ago as 1980 in the UK, it was not until 2000 and the passing of the FSMA and the creation of the civil option and the formation of the FSA as the principal regulator that it and market abuse could be pursued rigorously.

The general impression is that insider dealing and market abuse have not been eliminated over the last decade but probably continue today at a similarly high. The typical case that goes to court is of either a company director or an employee of an advising merchant bank being caught in a quite minor case yet as a consequence his career is ruined.

The longest UK prison sentence has been 30 months. Until it has been able to successfully prosecute a large City ring, the FSA or its replacement will continue to receive criticism for allowing most cases of insider dealing undiscovered and not prosecuted.