Archive for the ‘FSA views & reports’ Category

Tuesday, Aug 18, 2009 DUBAI (Zawya Dow Jones) — Saudi Arabia Tuesday imposed its first jail sentence for insider trading, ordering the former chairman of Bishah Agricultural Development Co. (6080.SA) to jail for three months, according to the country’s Capital Market Authority, or CMA.

Najam Eddin Ahmad Najam Eddin was sentenced to the prison term and fined SR100,000 ($26,670) after he was found “guilty of insider trading in Bishah shares based on him being the chairman of the company’s board,” the market regulator said in a statement on its Web site Najam Eddin also was barred from working for any listed company for five years, the CMA said.

The regulator said it also ordered him to pay back an amount of SAR52,690 gained through “irregular actions.”

The Committee of European Securities Regulators (CESR) has published its third set of guidance and information on the common operation of the Market Abuse Directive (MAD) on 15 May 2009.

The following topics are covered in the guidance:

• insider lists;

• suspicious transaction reports (STRs);

• stabilisation and buy back programmes; and

• the two-fold notion of inside information.

The guidance was published for European-wide consultation in two stages: (i) a first consultation paper covered topics on insider lists and STRs; and (ii) a second consultation paper dealing with the topics of stabilisation and the notion of inside information.

All issues have been integrated into this third set of guidance. However, CESR has emphasised that the third set of guidance has no formal legal status and does not necessarily represent the final word on the topics covered. CESR has also published one feedback statement on both of the consultation papers.

Copy of the Guidelines is available at: www.cesr.eu

Times Online writes about a solicitor who tipped off his father-in-law and profited from a takeover deal was jailed for eight months today in the Financial Services Authority’s (FSA) first criminal prosecution for insider dealing. Christopher McQuoid, 40, committed the offence while acting in his professional capacity and in a position of trust, said Judge Peter Testar, passing sentence at London’s Southwark Crown Court.

His father-in-law, James Melbourne, 75, was given the same sentence, but suspended for 12 months, partly because of his age. The lawyer, from Royston, Hertfordshire, and his father-in-law, of, Ripley, Derbyshire, were found guilty of one count of insider trading on Friday.

During a two week trial the court heard that the pair shared a £48,900 profit after McQuoid tipped off Melbourne that his employer, TTP Communications, was about to be taken over by US mobile giant, Motorola.

(more…)

1. Introduction 

The EU Market Abuse legislation (directives, regulations and Level 3 guidelines), with the market integrity and investor confidence as its primary objectives, represents a major achievement towards integrated financial markets in EU.

As a matter of domestic legislation and other applicable rules deriving from the Market Abuse legislation, issuers are expected to have adequate preventive measures, systems, procedures and controls in place to ensure discharge of their regulatory obligations and make it as difficult as possible to commit market abuse. The higher the quality of systems and controls implemented by the issuers, the lower the likelihood that their financial instruments become subject to insider dealing or other forms of market abuse.

Given the importance of issuers’ compliance efforts under the Market Abuse regime, it is vital that substantially similar standards and compliance arrangements will evolve to protect investor confidence and market integrity within the EU. A pre-condition for such evolution is an objective understanding about issuers’ anti-market abuse systems, controls and compliance practices as applied on a daily basis.

A survey conducted between February and March 2008 among leading multinational companies listed on the Nordic Market (1)  in cooperation with the City of London, represents an effort to capture such understanding on a regional level.

The survey was conducted by means of confidential questionnaire addressed to general counsels and compliance officers of companies listed on the Nordic Market. The questionnaire focused on selected elements of preventive anti-market abuse systems and controls dealing with:

• identification of inside information within the issuer and its group
• ensuring fair trading by members of the management bodies and employees
• proper handling of inside information and prevention of leaks
• ensuring the quality and reliability of compliance procedures, techniques and record-keeping regarding the above
• internal allocation of responsibilities and tasks regarding the above.

This article summarizes the key-findings of the survey and aims to provide useful comparative information for those in charge of legal and compliance with respect to Market Abuse rules.

(more…)

Telegraph writes about Richard Ralph, a former Governor of the Falkland Islands and a past British ambassador to both Peru and Romania, has been fined £117,691.41 by the City regulator after it was discovered he asked a friend to buy shares in Monterrico Metals.

Mr Ralph became chairman of Monterrico in August 2006, shortly before the £93m mining business was taken over by China’s Zijin Consortium. The FSA found that during the takeover talks Mr Ralph asked his friend Filip Boyen to buy about £30,000 of shares in order to conceal his true identity.

At the time, Mr Ralph was closely involved in the takeover talks and was and would have been expected to publicly disclose any dealing in company shares. As well as buying the shares for Mr Ralph, Mr Boyen also bought shares for himself worth £77,162.05. After a takeover deal was announced to the market, Mr Boyen sold both men’s holdings, generating a collective profit of £42,174.36.

Once the FSA began to investigate suspicious trading prior to the takeover, Mr Ralph voluntarily contacted the FSA and admitted to insider dealing. Mr Boyen was fined £81,982.95 and sources said both fines would have been as much as a third higher had it not been for the full co-operation and early settlement by the pair.

Before joining Monterrico, Mr Ralph had a long career as a diplomat, beginning in 1969. He previously hit the headlines when serving as ambassador to Romania after he was embroiled in a controversy surrounding the attempt by steel tycoon Lakshmi Mittal to take over Sidex, a Romanian steel plant.

Reuters writes that The U.S. Securities and Exchange Commission said on Wednesday it had brought the highest number of insider trading cases in its history during the 2008 fiscal year that ended Sept. 30.

The SEC also said the 671 enforcement actions of all types was the second highest on record.

“The SEC’s role in policing the markets and protecting investors has never been more critical,” said SEC enforcement director Linda Thomsen in a statement. “The staff’s commitment is unwavering year-in and year-out.”

The SEC’s enforcement division has been criticized in recent weeks by its own internal watchdog and lawmakers. The SEC’s inspector general found earlier this month that an SEC regional director failed to vigorously enforce securities laws in a 2003 investigation into Bear Stearns’ pricing of collateralized debt obligations.

The inspector general found in a separate report released in October that the SEC should discipline Thomsen and two supervisors for their role in an insider trading probe.

And this week, Sen. Chuck Grassley, the ranking Republican on the Senate Finance Committee, wrote to SEC Chairman Christopher Cox, citing “anonymous but specific” information on what he called inappropriate contact between SEC’s enforcement director and JPMorgan’s general counsel while the investment bank was mulling a bid for Bear Stearns.

The SEC declined to comment on Grassley’s letter.

The agency said on Wednesday that for the just-completed fiscal year, the number of insider trading and market manipulation cases rose more than 25 percent and 45 percent, respectively, over the prior year.

Read the whole story …

Hedge Funds Review wrote that Recently the UK Financial Services Authority (FSA) broke new ground by taking action against a hedge fund manager for using inside information to deal in corporate bonds (UK FSA fines hedge fund manager over insider trading, September 9, 2008).

Steven Harrison, the former manager with Moore Capital Management, was fined £52,500 and agreed not to perform any controlled function for a period of 12 months.Although this is not the first time the FSA has taken action against a hedge fund manager for market abuse, it is the first case involving activity in the credit markets.

Hedge funds and their managers need to focus on this case. Two important questions are of immediate concern:

Are hedge funds providing adequate training to enable staff to identify how the market abuse and insider dealing regimes relate to their business?

Do hedge funds have effective procedures in place to identify when they receive inside or restricted information and how to conduct themselves when they do?

Although the FSA found Harrison’s conduct was not deliberate, it did make the point that he “ought to have realised that the information he was given constituted inside information”.

This is an unusually sympathetic view for the regulator given that it had evidence that Harrison had been asked if he “wished to receive restricted information in connection with an upcoming financing”. This was immediately before being given information, which he later claimed he did not identify as inside information, and despite the fact he almost immediately instructed his traders to purchase the bonds to which the information referred.

It is doubtful the FSA will continue to be so sympathetic. Hedge fund managers can expect closer scrutiny in respect of equity markets and credit market transactions.

It has been almost a year since the FSA published its findings of visits to hedge fund managers in Market Watch 24. The visits focused on the controls in place to mitigate the risk of market abuse. The FSA commented it was “disappointed by some of what we saw”.

In April 2008 the FSA’s market cleanliness update reported informed price movements (IPMs) as being just under 30% of all takeovers during 2007. This was up from the previously published 2005 figure of 23.7% which at the time the FSA said remained “a cause for particular concern”.

The FSA’s action was designed to send a clear message of the regulator’s expectations in this area. Given the ‘disappointing’ results from its review of hedge fund’s market abuse controls and the rising instances of IPMs, it can only be a matter of time before the FSA looks for more suitable scalps to underline its credible deterrence message in insider dealing and market abuse.

Fund managers need to think carefully about the consequences of being wall crossed and ensure that if they are they do not become involved in trading affected securities.