Great Titchfield Street, London -- Here's a new term we'll be hearing a lot more of in the future -- market abuse. It's got nothing to do with screaming obscenities at your portfolio (although if it makes you feel better, just go ahead). It's one element of the FSA's new powers, now that it has become the super-regulator for the UK's finance industry. In particular, it falls under the new Code of Market Conduct.
Why is this important? First of all, it is in all our interests to have fairer markets. It boosts the confidence of those who invest and generally leads to greater wealth over time. Secondly, you have to make sure you don't fall foul of the new regulations.
In the past, insider dealing and market manipulation offences have been hard to prove. Very few people have actually been convicted of them. The idea of the new market abuse regulations is to spread the net a little wider. They also allow unlimited financial penalties to be imposed. Insider dealing is a criminal rather than a civil offence.
There are three main aspects of market abuse -- misuse of information, creating false/misleading impressions, and distortion. It's an offence to commit any of these or to encourage others to do so. The last of these three is the least applicable to the average investor. This involves buying (or selling) in quantities large enough to affect the price of an investment. Misuse of information is also going to be rare, as relatively few people will be in possession of non-public information about a company that is significant enough to move its share price.
But spreading false and misleading impressions is something that is relative easy to do, and it's something particularly relevant to this site due to our discussion boards. The fact that we don't have boards for 'penny shares', the companies most susceptible to false rumours (due to their small market value), means we suffer from this problem far less than most other sites.
However, you may sometimes suspect someone of wrong doing on our discussion boards. What should you do? Calmly presenting an accurate account is often the best way to counteract a false impression. It rarely helps to make public accusations. This can often lead to a slanging match which further clouds the truth. If you are convinced that someone is deliberately and maliciously spreading a false impression, the best response is probably to use our "Report This Post" mechanism. The link is at the top left of each message.
Will these new regulations make much difference? It's far too early to tell. It depends how much resource the FSA throws behind it. They do appear to be stretching themselves quite thinly at the moment. It may be that the greatest effect of their new powers is as a deterrent. But it's another step towards fairer markets and that is what the Motley Fool likes to see.
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