Partner expulsion case offers lessons to LLP firms and their partners
In a speech at the “Recent Developments in the Market Abuse Regime” conference Julia Hoggett, Director of Market Oversight at the Financial Conduct Authority (“the FCA”), signaled that the FCA will begin to focus on unearthing market manipulation and market abuse in markets outside the area of equities trading.
A look at the FCA Enforcement Annual Performance account 2016-17 shows that during 2016-17, 78 insider dealing cases were opened, compared to just 29 market manipulation investigations.
Whilst equity insider dealing had been a clear focus in the past, Ms Hoggett stated that “all relevant markets are vulnerable to both insider dealing and manipulation, therefore [the FCA] are now even more focused on seeking out evidence of market manipulation across asset classes and combatting abuse wherever we find it.”
Over 70% of suspicious transaction and order reports (STORs) received by the FCA relate to equity insider dealing. STORs are required to be submitted by firms and individuals professionally arranging or executing transactions in certain financial instruments.
The figures show that there are fewer STORs for equity manipulation than equity insider dealing and behaviour in fixed income and commodity markets constitutes a small fraction of the total.
Ms Hoggett commented that “the state of mind that market abuse only takes place in equities… needs to be thoroughly broken” and echoed recent comments from the Director of Enforcement and Market Oversight, Mark Steward, that the FCA will “not shy away from pursuing those hugely important but inevitably complex market abuse cases where they arise.” She warned that ignorance of the requirements of the Market Abuse Regulations (MAR), or the absence of intent to commit market abuse, are not defences to breaches of MAR.
The message is that the FCA is committed to detecting and stamping out market abuse in all its forms, across all the markets it regulates. Previous experience suggests that such warnings are followed by investigation and enforcement action and therefore all those involved in the financial markets, including individuals professionally arranging or executing transactions, should take heed to understand their obligations and ensure that they conduct themselves appropriately.
For more information see our Financial Services Investigations page.
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