CeMAP FRE2 Principles for Businesses, Consumer Duty & Conduct Rules question: profit warning tomorrow

CeMAP FRE2Principles for Businesses, Consumer Duty & Conduct Rules

Callum, a protection adviser, learns from a client that the client's listed employer will issue a profit warning tomorrow. That evening he tells a friend about it over dinner, for no work purpose. Neither of them trades in the shares. What is the position under UK MAR?

A No market abuse has occurred, because nobody dealt in the shares
B Unlawful disclosure by Callum, because UK MAR bans it even if no one deals
C Only the friend has done wrong, because he is the one who received the inside information
D It is market manipulation, because the information was likely to move the share price

Show the answer and explanation

Answer: B. Unlawful disclosure by Callum, because UK MAR bans it even if no one deals

UK MAR Art 10 makes it unlawful disclosure to pass on inside information except in the normal exercise of an employment, profession or duties, and Art 14(c) prohibits it. No dealing is needed. Callum's disclosure over dinner had no work purpose. The friend has not done anything unlawful merely by receiving it, and market manipulation (Art 12) concerns false or misleading signals or price-setting, not passing on true information. CJA 1993 s52(2)(b) has a parallel criminal disclosure offence, subject to its statutory defences.

Common mistake

Believing market abuse needs a trade to have taken place.

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Original practice material mapped to the published CeMAP FRE2 learning outcomes. Independent, not endorsed by Walbrook (formerly LIBF). Verify figures and rules against current guidance before relying on them.