FCA says suspicious share moves hit record low

LONDON Wed Jul 10, 2013 1:07pm BST

The logo of the new Financial Conduct Authority (FCA) is seen at the agency's headquarters in the Canary Wharf business district of London April 1, 2013. REUTERS/Chris Helgren

The logo of the new Financial Conduct Authority (FCA) is seen at the agency's headquarters in the Canary Wharf business district of London April 1, 2013.

Credit: Reuters/Chris Helgren

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LONDON (Reuters) - The Financial Conduct Authority (FCA) said suspicious share price moves ahead of mergers fell to a record low following its crackdown on market abuse.

The FCA, launched in April to take a harder line on financial crime, said on Wednesday that 14.9 percent of mergers in 2012 were preceded by unusual market moves two days before the announcement.

This compares with 19.8 percent in the 2011 financial year which ended in March 2012, itself the lowest since 2003, when data gathering began.

Unexplained moves are defined as anything outside a stock's normal movement, which usually refers to volume and frequency of trading.

Etay Katz, a financial services lawyer at Allen & Overy, said the fall in suspicious trades was not a surprise given the very substantial efforts dedicated to enforcement.

"The trend would appear to strengthen the hand of the regulator to make them continue to focus on this area until they get a consistent level of reduction," Katz said.

Such unexplained moves are seen as an indication of possible insider trading but the watchdog has said there could be other factors, such as financial analysts correctly predicting a deal, or simply coincidence.

Few expect that unexplained price moves can be totally eradicated and that a level of around 10 percent would be a likely floor.

The data was published in the final annual report of the Financial Services Authority which was scrapped in March to make way for the FCA.

The FSA had pursued a "credible deterrence" policy for several years, imposing hefty fines and taking individuals to court for insider trading, a push the FCA has said it will continue.

The report said the Financial Ombudsman handled 2.1 million enquiries and complaints last year, over 7,000 each working day.

Some 74 percent of new cases were about payment protection insurance (PPI), with the number of complaints about the loan insurance product rising 140 percent to 378,699.

So far over 10 billion pounds has been paid out by banks to compensate for PPI mis-selling, forcing lenders to increase their capital holdings.

The annual report said FCA Chief Executive Martin Wheatley was paid a bonus of 86,000 pounds. Adair Turner, who stepped down as FSA chairman in March, received 252,000 pounds because he is restricted from taking paid employment until September.

(Reporting by Huw Jones, editing by Tommy Wilkes and Louise Heavens)

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