FSA Fragmentation Risks Disruption of Prosecutions, Enforcement Chief Says
The Financial Services Authority’s planned breakup shouldn’t be allowed to disrupt the regulator’s “pipeline” of criminal cases and record fines, said Margaret Cole, the FSA’s enforcement director.
The watchdog has four criminal insider-trading trials scheduled through next year and is prosecuting 18 people in four other cases, Cole said today at an FSA enforcement conference in London. The pipeline has taken years to build and “quick wins” in court aren’t possible, she said today.
“It’s important, if we are to continue to get results, that this pipeline isn’t disrupted, especially because these complex matters have a long investigatory period before charging and a lengthy court process before trial,” Cole said. “We must build on this progress -- not lose it.”
Chancellor of the Exchequer George Osborne said June 17 he will abolish the FSA and give most of its power to the Bank of England. The move comes as the London-based watchdog has stepped up its regulation activity and won three of the four insider- trading prosecutions it has brought to trial after complaints it did little to block the financial crisis.
The agency has transformed itself by hiring top quality workers who can “do battle” with those it regulates and end the perception that financial-industry professionals enjoy a two-tier system of justice, Cole said.
Mix of Powers
Cole also said that a mix of civil and criminal powers is important for a regulator, allowing some people to be prosecuted while others involved in the same investigations may receive civil fines.
“It’s an implicit argument that an agency with only criminal powers would lack flexibility,” Carlos Conceicao, a lawyer at the firm Clifford Chance LLP in London who used to work for the FSA, said in an interview.
The FSA’s enforcement unit, which prosecutes insider trading and market abuse, will be combined with the U.K. Serious Fraud Office and the Office of Fair Trading to create an economic crime agency.
A former trader at AKO Capital LLP, a London-based hedge fund, was ordered today to pay about 287,000 pounds ($421,000) in fines and restitution after being the first person to plead guilty to U.K. insider-trading charges.
The FSA had its first loss in an insider-trading case on June 3 when a jury cleared two lawyers and the former chief financial officer at a pharmaceutical company on eight counts of insider trading.
“Some of the failures are successes,” because they still deter illegal behavior, Daniel Schwarzmann, a PricewaterhouseCoopers LLP partner, said at today’s conference.