Financial Services Authority
Financial Insider Trading Investigated
September 25, 2001
The Financial Services Authority has produced a status report on investigations
into whether anyone - either the terrorist organisations themselves or others
who may have had knowledge of what was planned - profited from the terrorist
atrocities in the US.
The Financial Services Authority (FSA) has concentrated on looking at activity
in London on regulated markets, such as the London Stock Exchange, LIFFE and
the International Petroleum Exchange and at over-the-counter transactions.
The focus of the FSA has been particularly on airline and insurance stocks and
on oil prices. They have also responded to requests from a number of overseas
regulators for information on their stocks traded in London. This co-operation
- which is close and two-way - will continue.
The Financial Services Authority has requested a written report from all the
major 'Recognised Investment Exchanges' on their own monitoring over this period
and what actions they have subsequently taken.
Speaking at a conference on the new Market Abuse regime, Howard Davies commented
on the more general question of the role of 'short selling' in financial markets,
"In our view, short selling is in normal circumstances a natural and important
feature of the market. It provides liquidity and, many would argue, improves
'price discovery'. There are market arrangements designed to protect the interests
of investors and, of course, the process should only be possible to the extent
that holders of the stock are prepared to lend it on."
"But it has to be said that there have been some unattractive examples
of aggressive short selling in recent weeks. Consistent with our new powers
over market abuse which come into effect on 1 December, if we find specific
examples of abusive, and not just aggressive, practice in future, we will act.
But we do not see a case for a general prohibition. It has to be for individual
stock holders to exercise their own judgement as to whether, to whom and on
what terms they will lend."
The FSA regulates the financial services industry and has four objectives under
the Financial Services and Markets Act 2000:
maintaining market confidence;
promoting public understanding of the financial system;
the protection of consumers; and
fighting financial crime.
Crown copyright material reproduced with the permission of the Controller of HMSO.