The FSA has welcomed two recent proposals that it believes will help it to secure more prosecutions in market abuse and insider dealing cases.
In March, in a move apparently spurred by the recent raid on HBOS shares, Alistair Darling announced that the FSA will be given the formal power to give immunity from prosecution to whistle-blowers who expose market abuse. Explaining his decision, Darling told The Guardian newspaper: “I can’t allow us to get into a situation where people quite deliberately manipulate markets for personal gain and with the potential to destabilise the financial system.”
Under the proposal, the FSA would get the same power currently available to the Serious Fraud Office and the HM Revenue & Customs Prosecution Office as “specified prosecutors.” Immunity would be granted in return for witness evidence against other participants. The changes are expected to be enacted this year.
Granting immunity in insider dealing cases is a tactic commonly used by U.S. regulators. However, some market observers believe it is unlikely that traders would go directly to the FSA, but that it is more likely they would first approach their compliance officers.
In April, in a related development, the U.K. Attorney General Baroness Scotland announced a new consultation to examine a framework for plea bargaining in fraud trials. The aim of introducing plea bargaining, according to the Attorney General, will be to reduce the length of fraud trials and save public money, to reduce the strain on victims and witnesses caused by delay and to provide compensation for victims more quickly.
Announcing the consultation, Baroness Scotland insisted the move would not “mirror” U.S. - style plea bargaining and carefully referred to the proposed framework as “plea negotiations.”
If introduced, the plea negotiation system would enable prosecutors to negotiate a lower sentence in return for a guilty plea. The plea agreement would then be presented to the court for consideration, which would decide to approve or reject the agreement.
Described by the Attorney General as “modest” changes, the new framework will not require any legislation to be introduced.
Responding to the Attorney General’s announcement, FSA Enforcement Director Margaret Cole welcomed the proposal and said it would be a “powerful tool in securing a just result in complex fraud and other financial crime cases.”
In a later speech to the European Policy Forum, Cole also welcomed the decision to give the FSA the power to offer immunity, but warned it “would not bring overnight success.”
To read Alistair Darling’s comments (in The Guardian), click here.
To view the consultation paper on plea negotiations, click here: The Introduction of a Plea Negotiation Framework for Fraud Cases in England and Wales.
To read Margaret Cole’s speech to the European Policy Forum, click here: Enforcing Financial Services Regulation: the UK FSA Perspective.