A new report by Kinetic Partners, a financial consultancy firm, on monetary penalties issued against individuals & firms caught in market abuse cases, shows that the value of fines have spiked considerably in 2013.
The research consultancy firm conducted an investigation which assessed the UK-based Financial Conduct Authority’s (FCA) approach in dealing with this major breach. The move comes as no surprise to industry participants as the global financial markets have been plagued with scandals and drama in the shape of rates fixing and manipulation at international financial institutions.
Findings in the report showed that the FCA fined individual and organisations a total of $583,259,050 (£346,373,924) in 2013. The FCA follows in the footsteps of its predecessor, the Financial Services Authority, which was also strict on market abuse cases, in January 2012 the regulator fined a US hedge fund, Greenlight Capital, $12 million, for market abuse.
Further details in the report show that the overall number of cases have reduced, however the value of penalties issued by the watchdog were significantly higher YoY. The research consultancy found that the financial watchdog handed out fines of $794 million in total to more than 40 firms in 2013, a sharp increase of 52% on the $523 million in fines handed out a year earlier.
The FCA has been actively tackling issues in the UK’s financial sector. In its Annual report 2013/ 2014, the firm stated its first year was both challenging and encouraging. The regulator also said that it is making cultural and operational changes needed to meet its new statutory objectives.
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Monique Melis, Global Head of Consulting at Kinetic Partners, commented in a statement to the media: “There has been a growing awareness of how significantly market abuse impacts institutions and consumers alike. As such, the FCA’s focus has been centred on the detection and prosecution of market abuse including insider dealing, trading and market manipulation. The large fines imposed for market abuse and their potential impact on a firm’s reputation is a valuable tool for deterrence and a high priority on the regulator’s agenda.”
Market abuse is a serious concern for financial regulators across the globe, the FCA defines it on its website as: “Certain types of behaviour, such as insider dealing and market manipulation, can amount to market abuse.”
The FCA has specific rulings that firms and individuals must adhere to in relation to the Financial Services and Markets Act 2000, with specific focus on the Market Abuse Directive.
The Market Abuse Directive was launched in 2005, as an EU-wide directive that was established with common rules for firms operating in the region. Regulators can charge individuals and firms on a number of breaches they deem as market abuse, including: Insider dealing, Improper disclosure, Misuse of information, Manipulating transactions, Manipulating devices, Dissemination, Distortion and misleading behaviour.
The regulator plans to make changes to the market abuse directive, in July 2013 the Market Abuse Regulation (MAR) was agreed upon and will replace the current Market Abuse Directive 2004 when it comes into force in 2017.