Financial watchdog targets bosses in war on market abuse

Former media baron Conrad Black leaves the Dirksen Federal Courthouse after his sentencing hearing in Chicago, in this December 10, 2007 file photo.

LONDON (Reuters) - The Financial Services Authority will increase its focus on high-profile managers and bosses in the battle against market abuse, even if it means cases may take longer to conclude, its head of enforcement said on Wednesday.

Long accused of not doing enough to tackle financial crime, the FSA will be following the example of its U.S. counterparts, whose big name scalps have included homemakers' guru Martha Stewart and press baron Conrad Black.

"You can expect to see more supervision and enforcement focus on individuals, especially significant influence function holders," said Margaret Cole, the FSA's director of enforcement.

She told an industry conference that the FSA had in the past looked at individuals for cases of dishonesty -- where the result is typically prohibition, or being scratched from the professional register -- but said it would now also consider competence and fines for those who breach the FSA's principles.

"We have made a strategic decision to investigate more individuals, so even though that could well mean that cases take longer and quick public outcomes are delayed, we consider this a price worth paying to obtain credible deterrence," she said.

Cole cited a study by consultants Deloitte for the Office of Fair Trading which found that going for individuals was a more successful deterrent than moves against firms.

The FSA last month fined both furniture retailer Land of Leather Holdings and its chief executive over improper sales of payment protection insurance -- an example of how it can pursue bosses, even when they are not directly responsible for the misdemeanours in question.

POUR ENCOURAGER LES AUTRES

The FSA has increased its focus on market abuse in recent months, more than doubling the size of its team of lawyers and investigators with criminal expertise and announcing plans to make more use of jail sentences, alongside civil fines.

The government is also set to grant it additional powers, including the ability to grant immunity from prosecution in exchange for evidence to help track down "smoking guns".

Until earlier this year, it had not brought a criminal case for insider dealing since it took over prosecutions in 2001. It has now brought three, and more are in the pipeline, Cole said.

"If people have to go to prison for us to achieve that aim (of clean markets) then that is what we will do," she said.

"We intend to be bolder and more resolute in proceeding with market abuse and insider dealing cases so we can bring about a change in the culture of the City."

Firms, however, were mixed in their reaction to the plan to increase the focus on individuals.

Smaller firms, where many feel that targeting managers may make more sense, said they were concerned that going for an individual boss, sometimes to deter others from widespread practices, could bring down the whole company.

Others fretted that for larger firms an individual, even one with a "significant influence function", is not typically solely responsible for any abuse.

"It is rarely the case in larger firms that individuals can be held to account for what is (likely the) failure of the wider firm," Harry Baines, company secretary and group counsel at mortgage bank HBOS, said.

(Reporting by Clara Ferreira-Marques; editing by Rory Channing)