FCA: 43% more reports of suspicious trades in wake of Libor-rigging scandal

Dog Detective

The number of suspicious trades reported to the City regulator has rocketed in the last year, according to official figures.

The Financial Conduct Authority said there has been a 43% increase in cases of suspected market rigging since the Libor scandal and a clampdown on rogue traders.

In response to a freedom of information request, the FCA said it had received 117 self-reported cases over a 12-month period of possible distortion and manipulation of various markets, believed to include energy, minerals and financial securities.

The suspicious transaction reports that relate to "the misuse of information", or insider dealing, have increased to more than 1,000, up from 739 in the last equivalent annual period.

Earlier this year the FCA fined day-trading business Swift Trade £8m for moving share prices on the London Stock Exchange by rapidly placing and then cancelling orders on low-trades companies.

The FCA also slapped a £1m fine on stock-market trader, Samuel Nathan Kahn for share "ramping" and before that a £6m penalty on one of India's richest businessmen, Rameshkumar Goenka for market manipulation.

The watchdog said the increase in suspicious transactions was not a sign of increased wrongdoing so much as a greater understanding by traders of their need to be vigilant about their activities.

"The FCA has been working with the industry over the past 18 months to improve the standard of market surveillance undertaken by authorised firms, with a particular focus on increasing the scope of products and behaviours covered," said a spokesman for the City watchdog.

"This, alongside recent actions in relation to market manipulation, such as Swift Trade, Samuel Kahn and Rameshkumar Goenka, have helped firms better understand the types of behaviour we consider manipulative and therefore expect to be reported as suspicious," said the spokesman who believed that Libor fines also contributed to the increased number of potential misconduct.

The FCA said the latest figures on suspicious trades were current up to the end of August but the statistics had not yet been broken down into financial or commodity trades.

There has been increased focus on the regulation of oil and gas trading activities since the FCA and energy watchdog, Ofgem, undertook a probe into wholesale gas trades after reports of suspicious trading on 28 September 2011, from a price reporter and whistleblower, Seth Freedman, who worked for Icis-Heren. An investigation is still being carried out by the European Commission into suspected oil price collusion by BP, Shell and Statoil.

Companies have long been under obligation to self-report any potentially fraudulent trading activities they detected in their own organisations, but in previous years they have been slow to do so.

More publicity along with growing fines have made banks, energy companies and other trading houses aware their chances of being treated more leniently are much improved if they are shown to be proactive, say industry experts.

"Regulated businesses now know just how seriously regulators and politicians will treat market manipulation – they know that they can only expect leniency if they report proactively suspected cases of market manipulation that they come across," said Mark Spiers, head of wealth management at regulatory consultancy Bovill.

"The FCA has really clamped down on banks and individuals for a range of offences from manipulating oil futures to global depository receipts in the past year, as well as taking action against those who have allowed it to take place such as brokers and even compliance officers."

"It is sending out a clear reminder of the tough line it is prepared to take, not just towards the perpetrators themselves but anyone who fails in their duty to take appropriate steps to prevent others from committing market abuse."

This year the FCA has also issued fines for a number of manipulation offences including a £598,000 fine in July against US-based trader Michael Coscia for manipulating oil futures and the price of other commodities, such as wheat and soya beans.

In August it also fined a broker and compliance officer £46,000 and £70,000 apiece for actions enabling market abuse of securities traded on the London Stock Exchange by a Dubai-based private investor.

Royal Bank of Scotland was hit with a €391m (£324m) fine earlier this month after a European Commission investigation into Libor rigging that has seen eight major financial institutions hit with penalties totalling €1.7bn.

Barclays was fined £290m last year and its chairman and chief executive resigned after some of the bank's derivative traders were found to have rigged Libor.

Powered by Guardian.co.ukThis article was written by Terry Macalister, for The Guardian on Monday 23rd December 2013 00.01 Europe/London

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