Financial Conduct Authority (FCA) UK Regulation Sample Exam

In which scenario would the general defense of 'not expecting any person to deal...' apply?

1. In relation to fraud allegations

2. In relation to insider dealing allegations

3. In relation to regulatory breaches

4. In relation to market manipulation

The correct answer is: In relation to insider dealing allegations

The general defense of 'not expecting any person to deal...' applies in the context of insider dealing allegations because this defense acknowledges that individuals may not reasonably anticipate others acting on insider information. Insider dealing involves transactions executed based on material, non-public information, which, by its nature, hinges on the assumption that the insider does not expect anyone else to act on that information without prior disclosure. Therefore, the sentiment behind this defense rests on the premise that the insider had no belief that their actions would prompt others to make investment decisions based on confidential knowledge. In scenarios involving fraud allegations, regulatory breaches, or market manipulation, the expectations of individuals acting in the market differ significantly. For example, fraud typically involves deceit or misrepresentation, while regulatory breaches involve violations of established rules and standards imposed by regulatory bodies. Market manipulation focuses on attempting to artificially influence market prices or volume. In these cases, the relationship and responsibilities between parties are different, and the concept of expectation as a defense does not apply in the same way as it does for insider dealing.