Following Brexit, MAR will cease to apply in the UK, and the UK government will have the option of implementing the provisions of MAR by passing equivalent domestic legislation or grandfathering the existing regulation.
Some may be tempted to regard the prospect of UK exit from the EU as an opportunity to rethink UK regulation of market abuse as a matter of domestic law. However, in practice that may prove both challenging and misguided; the UK’s heavy influence on the EU legislation is self-evident. To a large extent, MAR reflects policy first developed in the UK Treasury and by the FSA/FCA.
There is also a very strong likelihood that whatever the future relationship between the UK and EU, there will be a requirement to demonstrate the equivalence of UK market abuse regulation with EU law. Moreover, even if there is no legal requirement, the costs and benefits for London and a financial centre of the UK tracking a significantly different course on market abuse regulation would need very careful consideration. The greatest challenge for the UK is therefore likely to be how to continue to promote both coherent policy and harmonised implementation with the EU in circumstances where its leading financial centre is no longer within the EU.
So, passing equivalent domestic legislation or grandfathering the existing regulation seems likely given that MAR was derived largely from the existing UK market abuse regime and that an equivalent regime is likely to be a requirement if the UK is to continue to have access to the single market.
The future post-Brexit may require a re-think of the underlying policy rationale for regulating insider trading and market manipulation and a re-balancing of market conduct prohibitions and regulation of market structure and will depend on the financial centres that London has an ongoing relationship with. Perhaps the focus should not be on seeking to “future proof” the market conduct regime to deal with the myriad of challenges that market innovation will present over the coming years. Instead, the post-Brexit world may present an opportunity for a fundamental re-examination of why we regulate the use of inside information in modern financial markets and what should be the preserve of market manipulation offences rather than structural market regulation.