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Market Abuse Regulation (MAR) definition and meaning | AML glossary

What is Market Abuse Regulation (MAR)? Definition and AML compliance meaning.

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Market Abuse Regulation (MAR) definition: What it means in AML compliance.

Market Abuse Regulation (MAR) is a significant piece of legislation introduced by the European Union to prevent market abuse across financial markets. This regulation aims to protect investors and the integrity of the financial markets by tackling practices like insider trading, market manipulation, and the unlawful disclosure of inside information. In simple terms, MAR focuses on ensuring that markets operate fairly and transparently, giving investors confidence that they can engage with them without being exposed to fraudulent activities or unfair advantages.

At its core, MAR makes clear the expectation for all market participants – whether institutional or retail investors – to act with integrity. By preventing market abuse, MAR aims to eliminate any unfair market practices that might distort trading prices or undermine investor trust. The regulation is wide-ranging and covers everything from the disclosure of inside information to the manipulation of stock prices and the misuse of financial instruments.

For instance, MAR requires companies to disclose inside information promptly and accurately to the public. It also places strict requirements on employees and market participants to avoid insider trading. Insiders – such as company executives or those privy to non-public information – are prohibited from trading based on that information. MAR goes a step further by establishing an obligation for market participants to act in a manner that does not manipulate or distort the price of financial instruments.

As a result, companies that engage in financial markets are required to implement systems and controls to monitor trading activity and to ensure that no market abuse takes place. The regulation has far-reaching implications for how businesses, investors, and even regulators approach market conduct, aiming to establish a level playing field for all.

What impact does Market Abuse Regulation (MAR) have on compliance teams?

For Anti-Money Laundering (AML) compliance managers in the UK, the Market Abuse Regulation adds an additional layer of complexity to your role. While your primary focus remains on preventing financial crime such as money laundering and terrorist financing, MAR introduces a new dimension to the monitoring and management of risks within financial markets. By aligning your AML efforts with MAR compliance, you’re not only fulfilling regulatory requirements but also enhancing the broader framework that ensures your institution’s activities remain transparent and above board.

One key consideration is the overlap between insider trading and money laundering. Insider trading could be a precursor to more serious illicit activities, such as the laundering of proceeds from financial crimes. As a result, it’s critical for AML teams to be vigilant in identifying unusual trading patterns that could signal market manipulation or insider trading. Monitoring suspicious transactions that could suggest market abuse can directly contribute to detecting potential money laundering schemes.

In the day-to-day operations, AML compliance teams should regularly review systems and processes to detect suspicious market activities. Using monitoring tools that cover both financial crimes and market abuse can be invaluable. This cross-functional approach to surveillance and risk management can give your business a more holistic view of potential compliance issues, allowing you to act quickly and mitigate risks.

Lastly, remember that failing to comply with MAR can lead to hefty fines and reputational damage.

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