The EU Market Abuse Directive: understanding the implications

Abstract

Purpose

To discuss the implications of the European Union Market Abuse Directive, which was adopted in December 2002, came into force at the close of 2003, and was adopted by member states in 2004.

Design/methodology/approach

Examines four key questions: What does the Market Abuse Directive mean to the operating model of the financial institution? How does the financial institution deal with the specific requirements of MAD organizationally, technically, and culturally? How can activities to address the MAD be integrated into current trading compliance, anti‐money‐laundering, and supervision policies and projects? What does MAD mean to the future of European compliance and what areas of focus will be needed next after this first initial step?

Findings

Without clear guidance from central regulators, a clear understanding of what is correct and what is incorrect behavior and consistent penalties, the MAD will do little but add more paperwork to the financial institution. The MAD, should not be seen as a single event that needs to be solved. Rather it needs to be part of an integrated strategy supported by enterprise technology. In this way, the MAD is merely a set of incremental requirements to an already robust strategy. The deployment of compliance and its supporting technology must be cross border and cross business unit, and must incorporate activities across the whole spectrum of compliance and operational risk exposure. Compliance, if effectively managed at a strategic level, pays for itself in a matter of months. It should not be considered cost of sale.

Originality/value

Should serve not only as a resource for compliance professionals in their efforts to address MAD, but also as tool to help enlighten non‐compliance staff on the challenges and focus the MAD requires.

Citation

Mangelsdorf, A. (2005), "The EU Market Abuse Directive: understanding the implications", Journal of Investment Compliance, Vol. 6 No. 2, pp. 30-37. https://doi.org/10.1108/15285810510644875