Bloomberg News

Lenders Must Report Rivals’ Suspicious Trades, FSA Says

December 06, 2011

(Updates with lawyer comment in fifth paragraph.)

Dec. 6 (Bloomberg) -- Banks face fines if they don’t tell regulators about suspicious transactions at rivals, even if they don’t have proof of wrongdoing, a lawyer at the Financial Services Authority said today.

U.K. financial institutions aren’t doing enough to report suspected market abuse, Jamie Symington, the head of the wholesale group in the FSA’s enforcement division.

“We still have a problem to overcome in terms of the mindset of market players,” Symington said in a speech in London. “Part of the issue, we believe, is that market players are not sufficiently focused on the requirement to submit suspicious transaction reports as an obligation. You can therefore expect to see the FSA more focused on holding market participants to account on this obligation in the future.”

The regulator has “invested heavily” in enhancing its surveillance capabilities and will complete a revamp of its database of market transactions next year, Symington said. Last month, the FSA enacted rules to ensure that mobile telephone conversations involving traders will be recorded for use in possible market-abuse probes.

The requirement isn’t new and “most firms are fully focused” on complying, said Simon Morris, a regulatory lawyer at CMS Cameron McKenna in London.

“While it’s true that a firm does not need proof of wrongdoing, it does need a reasonable belief that market abuse has taken place, and the FSA will challenge a reporting firm to explain the bases for its suspicion,” Morris said.

Market Abuse

Symington said the FSA relies on the industry to fight market abuse, and that its fines and sentences are getting bigger.

The Financial Conduct Authority, which will take over the FSA’s enforcement role in 2013 as part of a government restructuring of U.K. financial regulation, will continue the FSA’s strategy of credible deterrence, Symington said. The regulator has stepped up its efforts to combat the crime through criminal prosecutions of insider trading, fines and other civil penalties, and seeking court injunctions.

--Editors: Anthony Aarons, Peter Chapman

To contact the reporter on this story: Lindsay Fortado in London at lfortado@bloomberg.net

To contact the editor responsible for this story: Anthony Aarons at aaarons@bloomberg.net


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