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The FCA's work on market abuse and manipulation – a timely update

Posted on 29 June 2022

Abstract Architecture

On 17 June 2022, the FCA issued an update on its work in the market abuse and manipulation space. The FCA makes clear that "those considering attempting to manipulate our markets should be on notice that we will not hesitate to act". The FCA reiterates that it is "determined to tackle market abuse and insider dealing wherever there is evidence of it whether this is through the courts or our own powers".

The FCA states that this update is in response to "recent press reports about our approach" and an opportunity to remind firms of its approach to "deterring, detecting, and taking action where market abuse is suspected".

The FCA provide three key messages:

Detection

Detection is a key priority. The FCA's market data processor analyses over "30 million transaction reports and over 100 million order reports a day". The processor is a source of "regulatory sunshine that allows [the FCA] to oversee the market in close to real time". This data is complemented by Suspicious Transaction and Order Reports. The FCA "received over 90 reports a week last year, and the number sent increased by almost 15% in 2020". The FCA highlights that this information is assessed by specialist teams and if they are suspicious, the FCA will consider "what further action…is right for [the FCA] to take".

Deterrence

The FCA states that this detection work is an effective deterrent as, if "participants know they’re being watched, by us, by their employers, their brokers, by everyone involved in the market, they are less likely to take part in activity that seeks an unfair advantage".

Taking action

The FCA highlights the range of powers it has to take action. First, it states, "we have taken enforcement action ourselves where we’ve seen false or misleading statements or other forms of market manipulation". For example, in December 2020, the FCA fined Corrado Abbattista, formerly a portfolio manager, partner and Chief Investment Officer at Fenician Capital Management LLP, £100,000 for market abuse and prohibited him from performing any functions in relation to regulated activity. Second, the FCA has taken action using its criminal powers. The FCA highlights that "already this year we have been in court for a trial… we have another trial involving two defendants scheduled to start in October 2022 and a further three cases in which prosecution decisions will be made". Finally, the FCA highlights its civil enforcement powers, stating "more than 10 subjects are currently awaiting decisions on their cases".

Conclusion

It is unusual for the FCA to set out in this way an update on the work it is doing. The fact it has done so in response to press reports suggests it is sensitive to the topic of market abuse. While one part of its message is that its detection work itself acts as a deterrent, the sense from the update is that it will not be shy about taking action. This is in line with the FCA's Strategy 2022 to 2025 where "delivering assertive action on market abuse" is a focus area. Seeing the outcomes during the period will be the real test.

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