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May 7, 2008

FSA beefs up investigations team

by Gill Montia

Story link: FSA beefs up investigations team

The Financial Services Authority (FSA) is planning a clampdown on those who attempt to manipulate the markets for personal gain.

The regulator has more than doubled the size of its investigation team, to 30, and plans to bring more prosecutions to stamp out both rogue trading and insider dealing.

The move follows an incident in mid-March when market rumours wiped 20% off the value of HBOS shares in the space of one hour.

Days later, Chancellor of the Exchequer Alistair Darling said he was considering extending the powers of the FSA to allow it to plea bargain with City whistle-blowers.

The FSA is currently investigating allegations that the HBOS rumours emanated from traders looking to make profits by short-selling.

Traders involved in short-selling make money if certain stock goes down in price because they are selling shares they do not own in the hope of profiting from the price fall before repurchasing the stock.

While the FSA has launched an enquiry into the HBOS event, proving that individuals have manipulated the markets is notoriously difficult.

The investigation has so far focused on people who sold short that on the day in question and FSA staff have been examining instant messaging and other forms of communication for evidence of a conspiracy.

 

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