You may mock - and we certainly do - but the FSA is cracking down on insider trading. Initiatives have included cold calling traders to ask if anything’s up - and the regulator has just more than doubled its SWAT team of criminal prosecutors in its efforts to stamp out market abuse.
Now we learn that the very foundations of our British protections may be imminently under threat. A Treasury paper published back in February, on which consultation ends today, asked whether “superequivalent” provisions within regulatory regime should be extended. Otherwise these additional provisions related to market abuse will fall away at the end of June. The UK previously retained its wider scope and definitions, established back in 2001, when the EU’s more narrowly defined Market Abuse Directive came in. The proposal is to extend the provisions until the outcome of an EU review is known.
This was all brought to our attention by the CFA Institute’s Centre for Market Integrity. No prizes for guessing where they come out on the issue.
Superequivalence should stay. But the climate lately suggest the CFA will get their wish. The two provisions set to vanish in June are as follows.
One covers behaviour which gives rise to false or misleading impressions or distorting markets - vital if you’ve got bank robbers to hunt down.
The other is a treat. Instead of limiting abusive trading to that conducted on inside information, the UK’s provisions cast the net wider. In fact, anyone trading on “relevant information not generally available” could be guilty of market abuse.
Or RINGA.
The distinction is that “inside information” suggests that the recipient knew where the tradable nugget came from, and therefore knew it to be inside info. But, you see:
Some groups of individuals who have access to inside information arrange their affairs in a sophisticated way in an attempt to disguise the nature of the information being passed or the fact of it passing — often referred to as an insider ring.
Very tricky. So the RINGA provision removes the burden of proving how the information being abused was obtained. The FSA in their forthcoming crackdown need “only show that the information was RINGA, i.e. information not generally available that the regular user would be likely to regard it as relevant.”
Beware of trading on any relevant information you hear today. You can’t be too careful.
Related links
FSA to crack down on insider trading - FT.com
