UT (Tax & Chancery) UT-2022-000134 UT-2022-000135 UT-2022-000137 - [2025] UKUT 00214 (TCC)

DEPP 6.5C.2 provides that the Authority will determine a figure dependent on the seriousness of the market abuse, and whether it was referable to the individual’s employment, and sets out a formula for the determination of the penalty.

For penalties imposed on individuals for market abuse that are referable to their employment, the figure is the greater of:

The Authority will determine the percentage of relevant income, or profit multiple, which will apply by considering the seriousness of the market abuse and choosing a percentage between 0% and 40% and a multiple between 0 and 4.

There are five levels:

In deciding which level of penalty to apply, the Authority will consider a range of factors, including the impact of the market abuse, its nature, factors tending to show it was deliberate; and factors tending to show it was reckless.

Factors relating to the impact of the market abuse include the level of benefit gained or loss avoided, and whether the market abuse has had an adverse effect on markets.

Factors relating to the nature of the market abuse include: its frequency; whether the individual abused a position of trust; whether the individual caused others to commit market abuse; whether the individual has a prominent position in the market; and whether the individual is an experienced industry professional or held a senior position in the firm.

Factors tending to show market abuse was deliberate are identified as including: that it was intentional, in that “the individual intended or foresaw that the likely or actual consequences of his actions would result in market abuse”; the individual intended to benefit financially from market abuse; the individual knew that his actions were not in accordance with rules or procedures; the individual sought to conceal his misconduct or committed it in a way to avoid or reduce the risk of discovery; the individual thought his conduct would be difficult to detect; the individual’s actions were repeated.

Factors tending to show market abuse was reckless are identified as including: the individual appreciated there was a risk that his actions could result in market abuse and failed adequately to mitigate that risk; and the individual was aware there was a risk that his actions could result in market abuse but failed to check if he was acting in accordance with internal procedures.

Factors which are likely to be considered level 4 or 5 factors include that: the losses avoided or benefits gained were significant; the conduct resulted in a serious adverse effect on the orderliness of, or confidence in, the market; the market abuse was committed on multiple times; the individual was in a position of trust or in a prominent position in the market; the market abuse was committed deliberately or recklessly.

Factors which are likely to be considered level 1, 2 or 3 factors include that: little or no profits were made or losses avoided as a result of the market abuse; there was no or limited actual or potential effect on the markets; and the market abuse was committed negligently or inadvertently.