September 26, 2014

Conduct unbecoming

The FCA has what it cheerfully describes as a judgement-based approach to regulation. This allows the regulator to make a very subjective interpretation of what is acceptable conduct and what is not.

For example in recent enforcements against ‘market abuse’, the FCA relied upon s118(5) of the Financial Services Act, dealing with trading activity that gives a false impression of the supply, demand and price of investments. The FCA does not impose comparative quantum caps on how much of a bond or stock can be held, but this was used to enforce a huge fine and ban against a trader recently.

The FCA also cited ‘egregious conduct’ of the trader in this case but declined to elaborate further on this. Many in the industry were left scratching their heads and asking what actually was the offence.

This is particularly worrying in the light of Tracey McDermott’s (the FCA’s Head of Enforcement) recent comments about the need to focus on compliance and culture. She has advised that firms should look at enforcement and learn from where their peers have got things wrong. Unfortunately some of these are obvious though whilst others frankly are not!

The proposed new set of what ‘Conduct rules’ may actually be welcomed in defining what is and what isn’t acceptable.

By Neil Herbert Blog Share:
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