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FSA and stiffer penalties to individuals - Essay Example

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FSA and stiffer penalties to individuals Name: University: Course: Tutor: Date: Introduction Financial Services Authority (FSA) is the institution responsible for regulating the financial services market in the U.K. FSA is a limited company fully owned by UK government while the Board of directors is appointed by the Treasury department…
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Download file to see previous pages FSA also protects consumers by reducing financial crimes in the financial markets (Davidson 2010). In the past few weeks, FSA has imposed heavy penalties on individuals for regulatory breaches. FSA has been much more efficient in ensuring prosecution of individuals who breach regulatory requirements. FSA has implemented a new policy that is aimed at deterring financial crimes through imposing penalties that reflect the magnitude of the regulatory breach, or financial scandal (Pettet 2001). The recent penalties are based on numerous factors including the need to achieve an appropriate deterrence effect and removal of any profits that may have accrued due to the regulatory breach. FSA has also considered the mitigating and aggravating factors and need to apply any settlement discount in imposing the high penalties (Davidson 2010). Main legal aspects of the cases The Financial Services and Markets Act 2000 and Market Abuse regulations of 2005 mainly deal with insider dealings and market price manipulation misconducts. The offence must occur in the prescribed markets. The prescribed markets include the markets governed by UK recognized investment exchanges (RIE) and other markets in the EEA countries. Some of the financial markets in the UK, where such market abuse occur include ICE futures, London stock exchange and London Metal exchange limited. Other markets include the NYMEX Europe limited and EDX London Ltd (Davidson 2010). The qualifying investments that are governed by FSA market abuse regulations include the transferable securities like shares, securitized debts and bonds that are regulated by the ISD directive. Other securities include the forward interest agreements, currency and interest rate swaps, future contracts and derivative securities. Firms are required to report any suspect dealings and implement adequate internal control and compliance mechanisms (Davidson 2010). FSA has the powers to deal with misconduct that is not necessarily market abuse but that breach the guiding principles of FSA. Sections 401 and 402 allow FSA to prosecute various financial markets offenses under the Financial Services and Markets Act of 2000 and any other relevant legislation (Pettet 2001). Some offenses include offering securities for sale to the public without publishing a prospectus since FSA listing requirements under Section 85(2) require the issuer to provide a prospectus before the actual listing. Section 397 of the Act prohibits firms and individuals from making fraudulent and misleading statements and manipulating the market fundamentals (Pettet 2001). Insider dealing is one of the criminal offenses that have led to high penalties to individuals. Insider trading is a criminal offence if the individual transacts the securities with inside information, or encourages another person to transact in the securities while in possession of inside information that is not available to other market participants (Davidson 2010). If the insider avails information to a market player other than in the ordinary performance of his duties or employment, FSA will consider such act as criminal insider dealing. Section 52(3) outlines that the above offenses are committed when dealing with a security in the regulated market or where transactions of price affected securities are executed by an individual using the inside information or are conducted by a professional intermediary using such inside ...Download file to see next pagesRead More
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