1 Introduction

Purpose

(1) The purpose of the Rules of Market Conduct ("RMC") is to supplement the Market Abuse provisions in Parts 8 and 9 of the Financial Services and Markets Regulations 2015 ("FSMR").
(2) The RMC is intended to:
(a) assist persons in determining whether or not conduct amounts to Market Abuse;
(b) assist persons such as Authorised Persons and Recognised Bodies who may be subject to obligations to monitor for, prevent, or report Market Abuse to comply with their obligations; and
(c) clarify that certain market practices do not, in the Regulator's view, ordinarily amount to Market Abuse.
(3) The RMC is relevant to any person to whom Parts 8 or 9 of the FSMR apply. Parts 8 and 9 apply to persons generally, that is:
(a) whether an individual, Body Corporate or body unincorporated; and
(b) whether regulated by the Regulator (such as an Authorised Person or a Recognised Body) or unregulated.
Structure
(4) The chapters in the RMC generally set out for each type of Market Abuse:
(a) the text of the prohibition and relevant definitions;
(b) the Regulator's interpretation of elements of the prohibition (including factors it may take into account in determining whether or not there has been a Contravention);
(c) general or specific examples of conduct that in the Regulator's view may contravene the prohibition; and
(d) where relevant, defences in the FSMR.

Where the RMC sets out the text of a prohibition, definition or defence, it sometimes does so in abbreviated form to assist the reader. For the precise terms, readers should refer to the FSMR itself.

Terminology
(5) Defined terms are identified throughout the RMC by the capitalisation of the initial letter of a word or each word of a phrase and are defined in the Glossary ("GLO"). Unless the context otherwise requires, where capitalisation of the initial letter is not used, an expression has its natural meaning.
(6) Unless the context otherwise requires, where the RMC refers to:
(a) Parts 8 and 9, the reference is to Parts 8 and 9 of the FSMR;
(b) a section, the reference is to a section in the FSMR;
(c) a prohibition, the reference is to a section in Parts 8 and 9 of the FSMR that prohibits specified conduct;
(d) Market Abuse, the reference is to conduct which contravenes a provision in Parts 8 and 9 of the FSMR; and
(e) Trading Information, the reference is to information referred to in Rule 5-2(9) of the RMC.
RMC not exhaustive
(7) The RMC does not try to exhaustively describe or list:
(a) all examples of Market Abuse, setting out only a few of the many possible examples; or
(b) all factors that the Regulator may take into account in deciding whether or not conduct amounts to Market Abuse.
Application to Financial Instruments and Related Instruments
(8) The Market Abuse provisions apply to certain activities or conduct related to Financial Instruments. A "Financial Instrument" means any instrument which is admitted to trading on ADGM or for which a request for admission to trading on ADGM has been made.
(9) Section 92(2) (Insider Dealing) also applies to a "Related Instrument", which is defined as meaning:

"...in relation to a Financial Instrument, an investment whose price or value depends on the price or value of the Financial Instrument."

For example, if an Insider has Inside Information relating to an Issuer, A, of Financial Instruments, then a "Related Instrument" could include a Derivative relating to the Financial Instruments of A or another Financial Instrument in a member of A's Group, if the price or value of that other Financial Instrument depends, in whole or in part, on the price or value of Financial Instruments of A.
(10) Refraining from action may be considered conduct amounting to Market Abuse where a person has failed to discharge a legal or regulatory obligation or has failed to inform those persons to whom he has made certain representations that such representations have ceased to be correct.
(11) The Market Abuse provisions apply to Financial Instruments whether or not the Financial Instruments are admitted to an Official List or admitted to trading on a market in the ADGM. As a result the Market Abuse provisions have a potentially broad application to Financial Instruments in the ADGM or affecting ADGM markets.

Application to conduct within the ADGM
(12) The Market Abuse prohibitions at section 93(1) are expressed to apply to Behaviour in the ADGM, or in relation to Financial Instruments admitted to trading on a Prescribed Market situated or operating in the ADGM.
(13) In addition, the Market Abuse provisions apply to Financial Instruments for which a request for an admission to trading on a Prescribed Market has been made in accordance with section 93(1)(b)(ii).
(14) The following are examples of conduct which occurs outside the ADGM that, in the Regulator's view may, depending on other factors such as the state of knowledge of the person concerned, fall within the scope of the Market Abuse provisions:
(a) a person outside the ADGM places an order to trade that creates, or is likely to create, an artificial price for a Financial Instrument traded on an Exchange in the ADGM;
(b) a person engages in conduct outside the ADGM that manipulates the price of a benchmark or Financial Instrument and affects the price of a Derivative admitted to trading in the ADGM that is referenced to that benchmark or Financial Instrument;
(c) a person who has Inside Information relating to an Issuer that has Financial Instruments traded on an Exchange in the ADGM discloses that information outside the ADGM to another person (other than in the necessary course of business of the person making the disclosure); and
(d) a person outside the ADGM contacts potential investors in the ADGM and makes statements that are misleading, false or deceptive in order to induce those investors to buy a Financial Instrument.
Intention to commit Market Abuse
(15) The Market Abuse prohibitions generally do not require that the person engaging in the relevant conduct intended to commit Market Abuse. However, a number of Articles require that the person knew or reasonably ought to have known of a certain matter e.g. that conduct would have a certain effect or that information is false or misleading (see, for example, section 102(1) (misleading statements)).

Systems and controls to prevent market misconduct
(16) An Authorised Person and Recognised Body is required under GEN Rule 3.3.20(a) to establish and maintain appropriate systems and controls that ensure, as far as reasonably practical, that the Authorised Person or Recognised Body and their Employees do not engage in conduct, or facilitate others to engage in conduct, which may constitute market misconduct.

Other provisions that apply to Prospectuses and Authorised Persons
(17) If a misleading or deceptive statement or a material omission occurs in a Prospectus, then separate and specific prohibitions and defences are likely to apply. These are set out in sections 67 and 68 of the FSMR.
(18) If an Authorised Person fails to make a timely disclosure of information to the market then section 201 is likely to apply. However, if an Authorised Person discloses information to the market which is false or misleading (and knows or could reasonably be expected to know that it is false or misleading) then the Market Abuse provisions may apply.