Archive for the ‘Europe’ Category

The Telegraph writes that two more individuals connected to US hedge fund Greenlight Capital have been fined over a multi-million pound insider-dealing case.

The European Commission has published its legislative proposals which revise the Market Abuse Directive. The proposed new framework consisting of a Regulation (directly applicable rules) and a Directive aims at:

• adaptation of the EU rules to the new market reality, in particular by extending their scope to financial instruments only traded on new platforms and over-the-counter, as well as adapting rules to new technology
• clarifying that market abuse occurring across both commodity and related derivative markets is prohibited
• reinforcing cooperation between financial and commodity regulators
• introducing tougher and greater harmonisation of sanctions (including criminal sanctions), and
• reducing administrative burdens on small and medium sized issuers.

As for insider lists the Commission has concluded that differences in national laws implementing the MAD have imposed unnecessary administrative burdens on issuers. The Regulation aims to eliminate these by providing that the precise data to be included in such lists should be defined in delegated acts and implementing technical standards adopted by the Commission.

Applying the new market abuse framework of the Regulation in an undifferentiated manner to all SME growth markets may deter issuers on those markets from raising capital on the capital markets. Without prejudice to the objectives of preserving the integrity and transparency of financial markets and of protecting investors, the proposal therefore adapts the market abuse framework to the characteristics and needs of issuers whose financial instruments are admitted to trading on SME growth markets.

The scope and size of the business of those issuers is more restricted and the events giving rise to the need to disclose inside information are typically more limited than those of larger issuers. The Regulation therefore requires those issuers to disclose inside information in a modified and simplified market-specific way. Such inside information may be published by those SME growth markets, on behalf of those issuers, in accordance with a standardised content and format defined in implementing technical standards adopted by the Commission. Those issuers are also exempt, under certain conditions, from the obligation to keep and constantly update insiders’ lists.

The Regulation further clarifies the scope of the reporting obligations in relation to managers’ transactions. These reports serve important purposes by deterring managers from insider trading and providing useful information to the market about the manager’s view on the price movements of the shares of the issuers. The Regulation clarifies that any transaction made by a person exercising discretion on behalf of a manager of an issuer or whereby the manager pledges or lends his shares must also be reported to the competent authorities and be made accessible to the public. Moreover, it introduces a threshold of €20 000, uniform in all Member States, which triggers the obligation to report such manager’s transactions. This higher threshold will contribute also to reducing the administrative burden on SMEs.

The proposal now passes to the European Parliament and the Council for negotiation and adoption. Once adopted the regulation would apply from 24 months after its entry into force.

Relevant links & valuable resources:

• Copy of the press release

http://europa.eu/rapid/pressReleasesAction.do?reference=IP/11/1217&format=HTML&aged=0&language=EN&guiLanguage=en

• Proposal for a Regulation of the European Parliament and of the Council on insider dealing and market manipulation (market abuse)

http://ec.europa.eu/internal_market/securities/docs/abuse/COM_2011_651_en.pdf

• Proposal for a Directive of the European Parliament and of the Council on criminal sanctions for insider dealing and market maniuplation

http://ec.europa.eu/internal_market/securities/docs/abuse/COM_2011_654_en.pdf

• Commission’s Impact Assessment Accompanying the document Proposal for a Regulation on insider dealing market manipulation (market abuse)

http://ec.europa.eu/internal_market/securities/docs/abuse/SEC_2011_1218_en.pdf

• Official FAQ

http://europa.eu/rapid/pressReleasesAction.do?reference=MEMO/11/715&format=HTML&aged=0&language=EN&guiLanguage=en

• Note from Freshfields Bruckhaus Deringer on the review of the Market Abuse Directive

http://www.freshfields.com/go/pdfs/Bank-of-the-Future-MAD-review-note.pdf

European financial markets have been very volatile over recent weeks. The developments have raised concerns for securities markets regulators across the European Union. ESMA has been actively monitor-ing the markets over the last few weeks and has been exchanging information with national competent authorities on the functioning of the markets and the market infrastructure.

Given these recent market developments, ESMA wants to emphasise the requirements in the Market Abuse Directive (MAD) referring to the prohibition of the dissemination of information which gives, or is likely to give, false or misleading signals as to financial instruments, including the dissemination of rumours and false or misleading news. European competent authorities will take a firm stance against any behaviour that breaches these requirements and ESMA will support national authorities to act swiftly against any such behaviour which is clearly punishable. While short-selling can be a valid trading strategy, when used in combination with spreading false market rumours this is clearly abusive.

In the area of short-selling regulation, many authorities already have either requirements for the disclo-sure of net short positions and/or bans of certain types of short sales in place2. Recent developments have meant that all competent authorities have reinforced the monitoring of their markets and are keeping their regulatory requirements under review. ESMA has coordinated discussions between the national compe-tent authorities, specifically on the content and timing of any possible additional measures necessary to maintain orderly markets.

Today some authorities have decided to impose or extend existing short-selling bans in their respective countries. They have done so either to restrict the benefits that can be achieved from spreading false rumours or to achieve a regulatory level playing field, given the close inter-linkage between some EU markets. These measures have been aligned as far as possible in the absence of a common EU legal frame-work in the area of short-selling and given the very different national legal bases on which such measures can be taken.

The following countries have today announced or will shortly announce new bans on short-selling or on short positions: Belgium, France, Italy and Spain. Information on these measures can be retrieved from the websites of the relevant competent authorities. The measures will take effect as of 12 August 2011.

The full text of the statement is available at: http://www.esma.europa.eu/popup2.php?id=7699

Christian Littlewood, a senior investment banker and former Financial Services Authority (FSA) Approved Person, his wife Angie Littlewood (also known as Siew Yoon Lew and Angie Lew) and a family friend Helmy Omar Sa’aid have pleaded guilty to 8 counts of insider dealing contrary to section 52 of the Criminal Justice Act 1993. They are alleged to have made approximately £590,000 profit from the trades.

The offences relate to trading in a number of different London Stock Exchange and AIM listed shares between 2000 and 2008 and were only brought to an end when the City of London Police working with FSA staff arrested the Littlewoods in March 2009.

The third defendant Helmy Omar Sa’aid was returned to the UK in March 2010 following the execution of a European Arrest Warrant in Mayotte, one of the Comoros Islands.

The case was bought by the FSA and heard at Southwark Crown Court. It is the sixth successful prosecution for insider dealing bought by the FSA and is part of its ongoing drive to tackle market abuse and promote efficient, orderly and fair markets.

Margaret Cole, managing director of enforcement and financial crime, said:

“It seems that the penny is beginning to drop. These guilty pleas show that our strategy of a tough approach to insider dealing – and, in particular, demonstrating that we are prepared to fight difficult criminal prosecutions to trial – is paying off. Dedicated hard work, bold and innovative use of the tools at our disposal and close seamless co-operation between our markets, enforcement and intelligence functions underpin our successful track record in this complex area.”

The full sentencing and confiscation hearing will take place in the week commencing 31 January.

http://www.fsa.gov.uk/pages/Library/Communication/PR/2011/002.shtml

FSA/PN/002/2011
10 January 2011

The UKA FSA has published the September 2010 edition (Issue No. 37) of its Market Watch newsletter. The newsletter deals with leaks of inside information.

During the past two years, the FSA conducted various intensive enquiries into disclosures of inside information to the media prior to certain announcements.

The aim of these enquiries was to identify suspicious contact between insiders to a corporate transaction and the media and included discussions with regulated firms as to their policies governing such contacts. In addition, the FSA continued its thematic work assessing regulated firms’ systems and controls on handling leaks.

The newsletter introduces the background and sets out the main findings on both work streams. It also contains a list of best practice recommendations in connection with contact with the media where the FSA believes improvement is necessary.

The FSA will continue to monitor for leaks of inside information. If no improvement is noticed in the level of leakage within the markets, the FSA is prepared to consider rule changes. However, it will also take action where it considers that unacceptable practices have occurred or existing systems and controls requirements applying to regulated firms and issuers have been breached.

Market Watch is available:

http://www.fsa.gov.uk/pubs/newsletters/mw_newsletter37.pdf

Times Online writes that The Serious Organised Crime Agency raids on some of banking’s big names have sent shock waves through the City of London.

/…/

The men are suspected of being part of what the watchdog has described as a “sophisticated and long-running insider dealing ring”. The FSA believes the ring made “significant profits” by trading on secret information.

This was the fifth set of arrests since it launched a crackdown two years ago, though this is markedly different from the others. Previous efforts have homed in on fringe players — interns at investment banks, retired stockbrokers, silver surfers with online trading accounts, and occasional rogues at second-tier firms.

Last week’s arrests struck at the heart of the City. Dodgson, 38, is known by the bosses of almost all Britain’s big banks and insurers. He has been a trusted adviser on deals for the likes of HBOS and Legal & General. He even played a bit-part in advising the Treasury on the banking bailout. His CV reads like a roll-call of the City’s biggest investment banks: Cazenove, UBS, Morgan Stanley, Lehman Brothers and Deutsche.

The same is true of the other suspects. Clive Roberts, who was also questioned on Tuesday morning, is head of equities at Exane BNP Paribas. His clients include some of London’s biggest traders, such as Roger Guy, star fund manager at Gartmore.

Julian Rifat, 41, whose Oxfordshire home was raided at 4.45am on Tuesday, is a trader with Moore Capital. Every device in his home that could store information was removed by investigators — including his children’s iPods.

Other suspects include well-known brokers and traders in the AIM market, regularly spotted out and about in City wine bars.

If the FSA can prove its case, it will shake the City to its core.

“I’m absolutely disgusted,” said one senior City banker. “The idea that someone in our line of work could do anything with inside information appals me. We get inside information all the time — it’s part of the job. You assume that everyone respects that. It’s what we do. You simply could not function if you were to spend all your time thinking that members of your team may be trading on that information.”

In the City’s biggest banks, it is assumed that insider dealing is something that happens somewhere else. There are armies of compliance staff monitoring every trade.

Read the whole story >>

Malcolm Calvert, a former equities marketmaker at stock broker Cazenove, was found guilty at Southwark Crown Court on five counts of insider dealing according to UK FSA. Calvert made approximately £103,883 profit from the trades that took place between June 2003 and October 2004.

The case is the third successful prosecution for insider dealing bought by the Financial Services Authority (FSA) and is part of its ongoing drive to tackle market abuse and promote efficient, orderly and fair markets.

The prosecution is also notable for the involvement of a key witness, Bertie Hatcher – a friend of Calvert – who agreed to provide evidence in the trial having been involved in the illicit dealings himself.

Margaret Cole, director of enforcement and financial crime at the FSA, said:

“This is another milestone in our fight against market abuse. It’s a misconception that insider dealing is a victimless crime: it damages the very confidence and trust our markets operate on and it must be stopped.”

“The guilty verdict is a shot across the bow for any city workers who may be tempted to trade using insider knowledge. Our message is simple: if you take part in such activity, you run a very real risk of the FSA taking criminal action against you.”

The full sentencing and confiscation hearing will took place on Thursday 11th March.

The FSA also announced that it has fined Hatcher, a retired bookmaker and insurance broker from Ipswich, £56,098 for market abuse, and published details of the agreement it made with him which led to his assistance in the prosecution of Calvert.

The FSA found that between 2003 and 2005 Hatcher had profited from inside information, using it to buy and sell about 420,000 shares in six companies. The fine represents the full disgorgement of his share of the net profit from these trades.

As part of a settlement with the FSA, Hatcher agreed to provide ongoing assistance to the investigation. In return, the FSA agreed to sanction Hatcher using its regulatory powers rather than a criminal prosecution; Hatcher’s fine was also reduced substantially owing to his cooperation.

Ms Cole continued:

“Hatcher took part in illicit trades using inside information and profited from them; because of this he has received a significant fine. However we were also mindful of the need to encourage others to come forward and assist in the investigation and prosecution of insider dealing and market abuse – especially where it is suspected that two or more people have been involved – and that is why we made an agreement with him.

“Hatcher provided valuable evidence to the FSA, not just about his own misconduct, but also in relation to Calvert. We will continue to enter into agreements of this sort where we believe it is in the public interest and interests of justice for the FSA to do so.”

Source: FSA UK Homepage