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ENF 15.7 Criminal prosecutions in cases of market abuse

ENF 15.7.1G

The FSA's power to impose sanctions for market abuse is intended to complement the existing criminal regime for insider dealing and misleading statements and practices offences. In some cases there will be instances of market misconduct that may arguably involve a breach of the criminal law as well as market abuse as defined in the Act. When the FSA decides whether to commence criminal proceedings rather than impose a sanction in relation to that misconduct, it will take into account those factors set out in the Code for Crown Prosecutors referred to in ENF 15.5. When deciding whether to prosecute market misconduct which also falls within the definition of market abuse, application of the tests set out in ENF 15.5 may involve consideration of some of the factors set out in ENF 15.7.2 G.

ENF 15.7.2G

The factors which the FSA may consider when deciding whether to commence a criminal prosecution for market misconduct rather than impose a sanction for market abuse include, but are not limited to, the following:

  1. (1)

    the seriousness of the misconduct: if the misconduct is serious and prosecution is likely to result in a significant sentence, criminal prosecution may be appropriate;

  2. (2)

    whether there are victims who have suffered loss as a result of the misconduct: where there are no victims a criminal prosecution is less likely to be appropriate;

  3. (3)

    the extent and nature of the loss suffered: where the misconduct has resulted in substantial loss and/or loss has been suffered by a substantial number of victims, criminal prosecution may be appropriate;

  4. (4)

    the effect of the misconduct on the market: where the misconduct has resulted in significant distortion or disruption to the market and/or has significantly damaged market confidence, a criminal prosecution may be appropriate;

  5. (5)

    the extent of any profits accrued or loss avoided as a result of the misconduct: where substantial profits have accrued or loss avoided as a result of the misconduct, criminal prosecution may be appropriate;

  6. (6)

    whether there are grounds for believing that the misconduct is likely to be continued or repeated: if it appears that the misconduct may be continued or repeated and the imposition of a financial penalty is unlikely to deter further misconduct, a criminal prosecution may be more appropriate than a financial penalty;

  7. (7)

    whether the person has previously been cautioned or convicted in relation to market misconduct or has been subject to civil or regulatory action in respect of market misconduct: where this is the case, a criminal prosecution may be appropriate;

  8. (8)

    the extent to which redress has been provided to those who have suffered loss as a result of the misconduct and/or whether steps have been taken to remedy any failures in systems or controls which gave rise to the misconduct: where such steps are taken promptly and voluntarily, criminal prosecution may not be appropriate; however, potential defendants will not avoid prosecution simply because they are able to pay compensation;

  9. (9)

    the effect that a criminal prosecution may have on the prospects of securing redress for those who have suffered loss: where a criminal prosecution will have adverse effects on the solvency of a firm or individual in circumstances where loss has been suffered by consumers, the FSA may decide that criminal proceedings are not appropriate;

  10. (10)

    whether the person is being or has been voluntarily cooperative with the FSA in taking corrective measures; however, potential defendants will not avoid prosecution merely by fulfilling a statutory duty to take those measures;

  11. (11)

    where an individual's misconduct involves dishonesty or an abuse of a position of authority or trust: in these circumstances, criminal prosecution may be appropriate;

  12. (12)

    where the misconduct in question was carried out by a group, and a particular individual has played a leading role in the commission of the misconduct: in these circumstances criminal proceedings may be appropriate in relation to that individual;

  13. (13)

    the personal circumstances of an individual may be relevant to a decision whether to commence a criminal prosecution.

ENF 15.7.3G

The importance attached by the FSA to these factors will vary from case to case and the factors are not necessarily cumulative or exhaustive.

ENF 15.7.4G

It is the FSA's policy not to impose a sanction for market abuse where a person is being prosecuted for market misconduct or has been finally convicted or acquitted of market misconduct (following the exhaustion of all appeal processes) in a criminal prosecution arising from substantially the same allegations. Similarly, it is the FSA's policy not to commence a prosecution for market misconduct where the FSA has brought or is seeking to bring disciplinary proceedings for market abuse arising from substantially the same allegations.

ENF 15.7.5G

Where the FSA decides to commence criminal proceedings for market misconduct or imposes a sanction for market abuse, it may also consider taking civil or regulatory action. That action may include:

  1. (1)

    applying to court for an injunction to prevent market abuse continuing or to require the person to take steps to remedy the consequences of the abuse (see ENF 6.4);

  2. (2)

    applying to court for an order for restitution (see ENF 9.4) or exercising its administrative power to require restitution (see ENF 9.5) in relation to profits accrued by the person or loss suffered by others as a result of the abuse.

  3. (3)

    withdrawal of approval (see ENF 7) or cancellation of permission and withdrawal of authorisation (see ENF 5).

  4. (4)

    prohibition of individuals from carrying out functions in connection with regulated activities (see ENF 8).

ENF 15.7.6G

The FSA does not have power to prosecute offences of market misconduct in Scotland. These proceedings will remain the responsibility of the Crown Office.