Market Abuse 101
Market abuse refers to unfair or illegal practices that undermine trust in financial markets. It includes insider dealing, market manipulation, and misleading information. Understanding these risks is the first step in protecting both investors and fair competition.
1. Key Forms of Market Abuse
- Insider Dealing: Using confidential information to gain unfair profit from trades.
- Market Manipulation: Artificially influencing prices (e.g., pump-and-dump schemes).
- Misleading Information: Spreading false or distorted data to trick investors.
2. Why It Matters
Market abuse threatens fairness, transparency, and stability in the financial system. It can lead to:
- Loss of investor confidence
- Unfair advantages for a few
- Financial instability and crises
3. Consequences
- Fines and criminal charges
- Loss of trading licenses
- Damage to reputation and trust
4. How to Prevent Market Abuse
- Strong internal compliance and monitoring
- Transparent reporting practices
- Education and awareness for staff and investors
- Zero tolerance for suspicious activity