It is rare for the Financial Services Authority to be accused of wielding too much power — more frequently we are criticised for not doing enough.
But concerns have been raised that a recent Court of Appeal decision has given the FSA — and other private prosecutors — the means to prosecute beyond the parameters set by Parliament and without safeguards. Surely this decision should be seen as a victory for common sense? It means that the FSA can take action against all the criminality associated with white-collar crime within its remit — specifically insider dealing.
The Financial Services and Markets Act 2000 gives the FSA its powers and we are the lead prosecutor in cases of market offences, including insider dealing. In giving us these powers Parliament was addressing the problems of the past where our predecessors struggled to make headway against market abuse — because they had too little power. Insider dealing in particular is a notoriously difficult offence to prove and prosecutors the world over struggle to find sufficient evidence to bring miscreants to book.
The reality of most insider dealing cases is that they rarely end with criminals abusing their position to make deals. They also try to hide their actions and where they make a profit, attempt to conceal it.
In recent years the FSA has taken huge strides to tackle market abuse in the UK. We have made it abundantly clear that we will use every tool available to us to pursue offenders and through example deter future market abuse. We have won the first two of our criminal prosecution cases, including the recent convictions of Neel and Matthew Uberoi. We have three cases awaiting trial, with others under investigation. This is a good start.
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However, each case presents fresh legal challenges that need to be resolved for future prosecutions. This does not mean that the FSA is on a power grab. We have no interest in encroaching on the remit of our fellow regulators and have sufficient work to do within our own area of regulation. If the FSA is to make a serious dent in market abuse, we must have the power to prosecute offenders for everything they do to commit insider dealing. This means that when they launder money, we can prosecute them for this crime as well, not just the market abuse.
The FSA takes every care to consider the evidential and public interest considerations set out in the Code for Crown Prosecutors whenever we consider a prosecution. We are committed to following the legal book to the letter and not abusing the safeguards that Parliament has put in place to prevent malicious and inappropriate prosecutions.
Our concern is the abuse of markets and to ensure that investors, shareholders, firms and society have confidence that the UK’s money markets are transparent and fair. Much has been said recently about the importance of competition and that in the drive to reform financial services London must not lose out. The FSA has been leading the way in global regulatory reform. But effective regulation has to have bite — regulators need the threat of meaningful sanctions including the threat of imprisonment which clearly reflect the crimes committed, to deter and change bad behaviour. So we do welcome the Court of Appeal’s recent decision. The FSA needs and is resolved to have sharper teeth.
David Kirk is chief criminal counsel at the Financial Services Authority