Samar Salah Abdullah
Teaching assistant
Kuwait International Law School (KILAW)

Abstract:

This study sheds light on the subject of the theory of civil liability and its applications in market abuse practices in financial markets. The importance of the topic lies in the scarcity of legal studies and research of it, in addition to the fact that the Kuwaiti legislator did not draw up special legal rules to compensate the victims of illegal practices. Because of this, the researcher followed the comparative analytical, as well as extrapolating the trends of the French judiciary, which were changing regarding the issue under study. Furthermore, the Kuwaiti legislator failed to draw up well-defined rules for compensating the victims of illegal practices, which the researcher considers legislative deficiency.
If the Kuwaiti legislator applies the general rules of civil liability to cases of market abuse as being the relevant law for the compensation for damages, these rules may become able to settle complex and specific cases related to compensating victims of market abuse due to the difficulty of proving illegal practices which stem from the inability of the injured party to obtain documented evidence that third parties or financial market authorities have. In addition, the shareholder cannot file an individual lawsuit against the company’s management in cases of one of the forms of market abuse as only companies have this right because of the nature of the damage. Finally, the provisions of civil liability on market abuse makes it impossible for the injured party to prove the causation that led to the damage based on the market abuse regulations in taking the decision to invest, whether to sell, buy or keep securities.
In view of these difficulties that prevent compensation for victims of market abuse and referring to the guidance of comparative legal systems, the researcher has a number of recommendations. The first most important recommendation is for the Kuwaiti legislator to issue specific legal rules to compensate victims of market abuse with a simple legal presumption that the investor has relied on the illegal practices in his investment decision. The second recommendation is to establish a fund to compensate the victims of market abuse in the financial markets. The last recommendation is for the Kuwaiti Capital Markets Authority to develop specialized awareness programmers to educate those affected by illegal practices in the financial markets, since this issue has not yet been brought before the Kuwaiti judiciary.

Keywords: Inside information, Manipulation of the financial market, Causation, Compensation.

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