There are three themes to be gleaned from the steady stream of market abuse
cases being brought by the UK Financial Services Authority, said the Acting
Enforcement Director Tracey McDermott. The first
theme is the role of professionals in stamping out misconduct in the
markets. In one case, the FSA not only took action against the person who
directed the trading, but also against the compliance officer who failed to
recognize the risk that inside information had been disclosed, the person who had improperly disclosed
information, and the person who failed to recognize and report the trading as
suspicious. Any one of those individuals could, by acting properly and
complying with their regulatory obligations, have done something about the
abuse, emphasized the Director, and none of them did so. All of them
ultimately paid a price for that inaction.
A second theme concerns people who are not setting out to
break the rules. Indeed they sometimes are attempting, albeit ineptly, to
stay within the letter rather than the spirit of the law. An example of
this is in the case of a trader at Credit Suisse who was given confidential
information which he knew he should not disclose. So instead he decided
to try and give a client a hint by engaging in a bizarre guessing game the end
result of which was that he disclosed confidential information and was hit with
a £210,000 penalty.
A third theme is that several enforcement actions have
applied the new penalties policy, which the FSA introduced in March 2010.
The changes to the penalties framework gave the FSA a minimum starting point of
£100,000 for individuals who commit serious market abuse. The first fine
under the new penalties system was imposed on a person who was fined £1m for
market manipulation. This was followed by the FSA’s largest penalty on an
individual to date on an investor based in Dubai