5.1.1. Conduct amounting to Market Abuse

The following conduct, wherever it occurs and whether engaged or participated in directly or indirectly, amounts to Market Abuse for the purposes of section 86 of the Framework Regulations:

• (a) unlawful disclosure of Inside Information;
• (b) engaging or attempting to engage in Insider Dealing;
• (c) recommending that another Person engage in Insider Dealing;
• (d) inducing another Person to engage in Insider Dealing; and
• (e) engaging or attempting to engage in Market Manipulation.

5.1.2. Conduct not amounting to Market Abuse

The following conduct does not amount to Market Abuse for the purposes of section 86 of the Framework Regulations:

(a) disclosure of Inside Information made in the course of a Market Sounding;

(b) the behaviour described in MAR 5.3.4 to 5.3.6; and

(c) accepted market practices established under MAR 5.4.4.

(d) conduct of another activity which occurs outside the AIFC unless it affects the AIFC markets or their users.

5.2.1. Definition of Inside Information (general)

Inside information is information of a precise nature which:

• (a) has not been made public;
• (b) relates directly or indirectly, to one or more Issuers or to one or more Investments; and
• (c) would, if it were made public, be likely to have a significant effect on the prices of those Investments or on the price of related Investments.

Guidance: Inside Information An intermediate step in a protracted process will be Inside Information if, by itself, it satisfies the criteria of Inside Information.

5.2.2. Definition of Inside Information (execution of orders

For Persons charged with the execution of orders concerning Investments, Inside Information:

(a) has the meaning given in MAR 5.2.1 (Definition of Inside Information (general); and

(b) is information conveyed by a client and relating to the client’s pending orders in Investments which:

(i) is of a precise nature; and

(ii) relates directly or indirectly, to one or more Issuers or to one or more Investments; and

(iii) if it were made public, would be likely to have a significant effect on the prices of those Investments, the price of related spot commodity contracts, or on the price of related Investments.

5.2.3. Definition of Information of a ‘precise nature’

Information will be deemed to be of a precise nature if it:

(a) indicates a set of circumstances which exists or which may reasonably be expected to come into existence, or an event which has occurred or which may reasonably be expected to occur; and

(b) is specific enough to enable a conclusion to be drawn as to the possible effect of that set of circumstances or event on the prices of the Investments or the related Investments.

Guidance:

Precise information In the case of a protracted process that is intended to bring about, or that results in, particular circumstances or a particular event, those future circumstances or that future event, and also the intermediate steps of that process which are connected with bringing about or resulting in those future circumstances or that future event, may be deemed to be precise information.

5.2.4. Definition of Information likely to have a ‘significant effect’

Information which, if it were made public, would be likely to have a significant effect on the prices of Investments means information which a reasonable investor would be likely to use as part of the basis of his or her investment decisions.

5.2.5. Unlawful disclosure of Inside Information

Unlawful disclosure of Inside information occurs where:

• (a) a Person specified in MAR 5.2.6 possesses Inside Information and discloses that information to any other Person, except where the disclosure is made in the normal exercise of an employment, a profession or duties; or
• (b) a Person (‘A’) to whom a recommendation to engage in Insider Dealing is made or who is induced to engage in Insider Dealing, within the meaning of MAR 5.3.2, discloses the recommendation or inducement to another where A knows or ought to know that the recommendation or inducement was based on Inside Information.

5.2.6. Persons possessing Inside Information

MAR 5.2.5 (a) applies to:

• (a) any Person who possesses Inside Information as a result of:
• (i) being a member of the administrative, management or supervisory bodies of the Issuer; or
• (ii) having a holding in the capital of the Issuer; or
• (iii) having access to the information through the exercise of an employment, profession or duties; or
• (iv) being involved in criminal activities;
• (b) any Person who possesses Inside Information other than under the circumstances specified in (a) where that Person knows or ought to know that the information is Inside Information.

5.3.1 Definition of Insider Dealing

The following amount to Insider Dealing:

• (a) the use, by a Person who possesses Inside information, of that information by acquiring or disposing of, for its own account or for the account of a third party, directly or indirectly, Investments to which that information relates; or
• (b) the use of Inside Information by cancelling or amending an order concerning Investments to which the information relates where the order was placed before the Person concerned possessed the Inside Information; or
• (c) the use of recommendations or inducements to engage in Insider Dealing MAR 5.3.2 (Recommending or Inducing Insider Dealing), where the Person using the recommendation or inducement knows or ought to know that it is based on Inside Information.

5.3.2. Recommending or Inducing Insider Dealing

A Person (‘A’) recommends another Person (‘B’) to engage in Insider Dealing or induces B to engage in Insider Dealing, where A possesses Inside Information and:

• (a) recommends, on the basis of that information, that B acquires or disposes of Investments to which that information relates, or induces B to make such an acquisition or disposal; or
• (b) recommends, on the basis of that information, that B cancels or amends an order concerning Investments to which that information relates, or induces B to make such a cancellation or amendment.

5.3.3. Persons to whom MAR 5.3.2 and MAR 5.3.1 apply

MAR 5.3.1 (Definition of Insider Dealing) and MAR 5.3.2 (Recommending or inducing Insider Dealing) apply:

• (a) to any Person who possesses Inside Information as a result of:
• (i) being a member of the administrative, management or supervisory bodies of the Issuer; or
• (ii) having a holding in the capital of the Issuer; or
• (iii) having access to the information through the exercise of an employment, profession or duties; or
• (iv) being involved in criminal activities;
• (b) to any Person who possesses Inside Information other than under the circumstances specified in (a) where that Person knows or ought to know that the information is Inside Information; or
• (c) where the Person in (a) or (b) is a legal Person, in addition to that legal Person, to the natural Persons who participate in the decision to carry out the acquisition, disposal, cancellation or amendment of an order for the account of the legal Person concerned.

5.3.4. Behaviour that does not constitute Insider Dealing

A Person (‘A’) who is or who has been in possession of Inside Information will not be deemed to have used that information for acquisition or disposition of Investments merely because A is or was in possession of Inside Information:

• (a) Where A is a legal Person and A:
• (i) has established, implemented and maintained adequate and effective internal arrangements and procedures that effectively ensure that neither the natural Person who made the decision on its behalf to acquire or dispose of Investments to which the information relates, nor another natural Person who may have had an influence on that decision, was in possession of the Inside Information; and
• (ii) has not encouraged, made a recommendation to, induced or otherwise influenced the natural Person who, on behalf of the legal Person, acquired or disposed of Investments to which the information relates.
• (b) Where A:
• (i) for the Investments to which the information relates, is a Market Maker or a Person authorised to act as a counterparty, and the acquisition or disposal of Investments to which that information relates is made legitimately in the normal course of the exercise of its function as a market maker or as a counterparty for those Investments; or
• (ii) is authorised to execute orders on behalf of third parties and the acquisition or disposal of Investments to which the order relates, is made to carry out such an order legitimately in the normal course of the exercise of that Person’s employment, profession or duties;
• (c) Where A conducts a transaction to acquire or dispose of Investments and that transaction is carried out in the discharge of an obligation that has become due in good faith and not to circumvent the prohibition against Insider Dealing and:
• (i) that obligation results from an order placed or an agreement concluded before the Person concerned possessed Inside Information; or
• (ii) that transaction is carried out to satisfy a legal or regulatory obligation that arose, before the Person concerned possessed Inside Information.

5.3.5. Behaviour that does not constitute Insider Dealing – public takeover

It will not be deemed from the mere fact that a Person is in possession of Inside information that that Person has used that information and has thus engaged in Insider Dealing:

• (a) where such Person has obtained that Inside Information in the conduct of a public takeover or merger with a company and uses that Inside information solely for the purpose of proceeding with that merger or public takeover; and
• (b) provided that at the point of approval of the merger or acceptance of the offer by the shareholders of that company, any Inside Information has been made public or has otherwise ceased to constitute Inside Information.

5.3.6. Behaviour that does not constitute Insider Dealing – use of own knowledge

The mere fact that a Person uses its own knowledge that it has decided to acquire or dispose of Investments in the acquisition or disposal of those Investments will not of itself constitute use of Inside Information.

Guidance:

Behaviour that does not constitute Insider Dealing Notwithstanding the provisions in MAR 5.3.4 to MAR 5.3.6, an infringement of the prohibition of Insider Dealing may still be deemed to have occurred if the AFSA establishes that there was an illegitimate reason for the orders to trade, transactions or behaviours concerned.

5.4.1. Market Manipulation

Market Manipulation comprises the activities set in MAR 5.4.2 and includes the conduct set out in MAR 5.4.3.

5.4.2. Market Manipulation Activities

The following activities constitute Market Manipulation:

• (a) entering into a transaction, placing an order to trade or any other behaviour which:
• (i) gives, or is likely to give, false or misleading signals as to the supply of, demand for, or price of, a Security; or
• (ii) secures, or is likely to secure, the price of one or several Securities at an abnormal or artificial level; unless the Person entering into a transaction, placing an order to trade or engaging in any other behaviour establishes that such transaction, order or behaviour have been carried out for legitimate reasons, and conform with an accepted market practice MAR 5.4.4 (Accepted Market Practice); and
• (b) entering into a transaction, placing an order to trade or any other activity or behaviour which affects or is likely to affect the price of one or several Securities, which employs a fictitious device or any other form of deception or contrivance; and
• (c) disseminating information through the media, including the internet, or by any other means, which gives, or is likely to give, false or misleading signals as to the supply of, demand for, or price of, a Security, or secures, or is likely to secure, the price of one or several Securities, at an abnormal or artificial level, including the dissemination of rumours, where the Person who made the dissemination knew, or ought to have known, that the information was false or misleading; and
• (d) transmitting false or misleading information or providing false or misleading inputs in relation to a benchmark where the Person who made the transmission or provided the input knew or ought to have known that it was false or misleading, or any other behaviour which manipulates the calculation of a benchmark.

5.4.3. Market Manipulation Behaviour

The following conduct constitutes Market Manipulation:

• (a) the conduct by a Person, or Persons acting in collaboration, to secure a dominant position over the supply of or demand for a Security which has, or is likely to have, the effect of fixing, directly or indirectly, purchase or sale prices or creates, or is likely to create, other unfair trading conditions; and
• (b) the buying or selling of Securities, at the opening or closing of the market, which has or is likely to have the effect of misleading investors acting on the basis of the prices displayed, including the opening or closing prices; and
• (c) the placing of orders to a trading venue, including any cancellation or modification thereof, by any available means of trading, including by electronic means, such as algorithmic and high-frequency trading strategies, and which has one of the effects referred to in MAR 5.4.2(a) or (b), by:
• (i) disrupting or delaying the functioning of the trading system of the trading venue or being likely to do so; or
• (ii) making it more difficult for other Persons to identify genuine orders on the trading system of the trading venue or being likely to do so, including by entering orders which result in the overloading or destabilisation of the order book; or
• (iii) creating or being likely to create a false or misleading signal about the supply of, or demand for, or price of, a Security, in particular by entering orders to initiate or exacerbate a trend;
• (d) the taking advantage of occasional or regular access to the traditional or electronic media by voicing an opinion about a Security (or indirectly about its Issuer) while having previously taken positions on that Security and profiting subsequently from the impact of the opinions voiced on the price of that instrument without having simultaneously disclosed that conflict of interest to the public in a proper and effective way.

5.4.4. Accepted Market Practice

The activities referred to in MAR 5.4.2(a) will not constitute Market Manipulation if the Person entering into a transaction, placing an order to trade or engaging in any other behavior establishes that such transaction, order or behavior have been carried out for legitimate reasons, and conform with an accepted market practice as established by the AFSA.

5.5.1. Definition of Market Sounding

The following constitute Market Sounding:

• (a) the communication of information, prior to the announcement of a transaction, in order to gauge the interest of potential investors in a possible transaction and the conditions relating to it, such as its potential size or pricing, to one or more potential investors by:
• (i) an Issuer; or
• (ii) a secondary offeror of a Security, in such quantity or value that the transaction is distinct from ordinary trading and involves a selling method based on the prior assessment of potential interest from potential investors; or
• (iii) a third party acting on behalf or on the account of a Person referred to in (i) or (ii); and
• (b) disclosure of Inside Information by a Person intending to make a takeover bid for the Securities of a company or a merger with a company to parties entitled to the Securities, will also constitute a market sounding, provided that:
• (i) the information is necessary to enable the parties entitled to the Securities to form an opinion on their willingness to offer their Securities: and
• (ii) the willingness of parties entitled to the Securities to offer their Securities is reasonably required for the decision to make the takeover bid or merger.

5.5.2. Disclosure of Inside Information in the course of Market Sounding

Disclosure of Inside Information made in the course of Market Sounding will be deemed to be made in the normal exercise of a Person’s employment, profession or duties (and will not constitute unlawful disclosure of Inside Information (MAR 5.2.65) provided that the Person making the disclosure complied with the requirements in MAR 5.5.3 (Requirements on a Person conducting or intending to conduct Market Sounding).

5.5.3. Requirements on a Person conducting or intending to conduct Market Sounding

A market participant must:

• (a) prior to conducting a Market Sounding, consider whether the Market Sounding will involve the disclosure of Inside Information and make a written record of its conclusions and reasons thereof; and
• (b) before making the disclosure of Inside Information:
• (i) obtain the consent of the Person receiving the Market Sounding to receive Inside Information; and
• (ii) inform the Person receiving the market sounding that he is prohibited from using that information, or attempting to use that information, by acquiring or disposing of, for his own account or for the account of a third party, directly or indirectly, Securities relating to that information; and
• (iii) inform the Person receiving the market sounding that he is prohibited from using that information, or attempting to use that information, by cancelling or amending an order which has already been placed concerning a Security to which the information relates; and
• (iv) inform the Person receiving the market sounding that by agreeing to receive the information he is obliged to keep the information confidential; and
• (c) make and maintain a record of all information given to the Person receiving the Market Sounding, including the information given in accordance with points (i) to (iv), and the identity of the potential investors to whom the information has been disclosed, including but not limited to the legal and natural Persons acting on behalf of the potential investor, and the date and time of each disclosure. The disclosing market participant must provide that record to the competent authority upon request; and
• (d) provide its written record to the AFSA upon request; prior to conducting a Market Sounding.

5.5.4. Information which ceases to be Inside Information

Where information that has been disclosed in the course of a Market Sounding ceases to be Inside Information according to the assessment of the disclosing market participant, the disclosing market participant must inform the recipient accordingly, as soon as possible and maintain a record of the information given to the recipient.

5.5.5. Record Keeping

The disclosing market participant must keep the records referred to in MAR 5.5.3 and 5.5.4 for a period of at least five years.