The FSA's power to investigate suspected market misconduct is contained in section 168(2) of the Act (Appointment of persons to carry out investigations in particular cases) (see ENF 2.3.14 G (2)). The FSA may appoint an investigator if circumstances suggest that insider dealing or market abuse may have taken place, or that misleading statements have been made or misleading practices may have been engaged in. Where it appears to the FSA that there are circumstances suggesting that a firm may have engaged in market abuse, the FSA will consider appointing an investigator under section 168(2) to investigate that particular matter, rather than under section 167 (Appointment of persons to carry out general investigations). ENF 2.6.2 G deals in more detail with the circumstances in which the FSA may appoint investigators, in relation to both authorised persons and unauthorised persons.
When considering whether to use its powers to conduct formal investigations into market misconduct, the FSA will take into account a number of factors. These will include:
the seriousness of its concerns, including the effect of the misconduct on consumers or market confidence;
the nature of the possible contravention, including the type of market involved, and the duration and frequency of the possible contravention;
the context of the possible contravention; for example, where the behaviour in question happened or is happening in the context of a takeover bid and, in the FSA's opinion, any investigation may materially affect the timetable or outcome of that bid, the FSA will consult the Takeover Panel and will give due weight to its views; and
whether another regulatory authority is in a position to investigate and deal with the matters of concern.
As far as a recognised investment exchange or recognised clearing house is concerned, the FSA will consider the extent to which the relevant exchange or clearing house has adequate and appropriate powers to investigate and deal with the matters of concern itself. The FSA will consult with the relevant exchange or clearing house and give due weight to its views. Where appropriate, the FSA may use its own powers under section 128 of the Act (Suspension of investigations) to prevent a recognised investment exchange or recognised clearing house from starting an investigation or to limit, stop or suspend an existing inquiry.
As far as the Takeover Panel is concerned, as regards market abuse, the cases in which the FSA expects to take action against a person with Takeover Code responsibilities are limited, as ENF 14.9 (Action involving other UK regulatory authorities) makes clear. The FSA does not therefore expect to use relevant investigative powers unless one of the circumstances in ENF 14.9.6 G applies. Further, unless one of the following exceptions applies, the FSA will not start any investigation into behaviour that has happened or is happening in the context of a takeover bid while that bid is current. The exceptions are where: (i) the case falls within ENF 14.9.7 G, or (ii) the person whose behaviour is to be investigated is not a person who has responsibilities under the Takeover Code.