Compensatory penalties, hedge-fund insider cases mark SEC enforcement trends
By Nick Paraskeva
NEW YORK, March 14 (Thomson Reuters Accelus) - The U.S. Securities and Exchange Commission wants more power to fine firms and individuals for fraud and market abuses, in the face of tougher public scrutiny and judicial opposition to recent settlements. While the agency has been imposing stiffer penalties, the amount remains constrained by the agency’s current authority, said George Canellos SEC New York Regional Office Director.
Canellos was speaking as part of a panel last week on trends in financial enforcement and securities litigation after Dodd-Frank. The panel was organized by NYU Stern Business School and NERA Economic Consulting. (more…)
Einhorn/Greenlight Capital fine highlights duty for investors to seek absolute clarity over inside information
By Martin Coyle and Alex Robson
LONDON/NEW YORK, (Thomson Reuters Accelus) – A decision by the UK Financial Services Authority (FSA) to fine hedge fund manager David Einhorn and his Greenlight Capital fund 7.3 million pounds ($11.5 million) has highlighted the need for professional investors to ascertain clearly what constitutes inside information, securities lawyers said. The FSA said that it fined Einhorn 3.64 million pounds and Greenlight Capital 3.65 million pounds for using inside information that he obtained from a broker before selling shares in a UK public company in 2009. Einhorn’s is the biggest scalp by far of the FSA’s renewed determination to punish market manipulation as part of its “credible deterrence” policy.
The regulator said that Einhorn learned from a telephone conversation with the broker that British pub company Punch Taverns was on the verge of a significant equity fundraising, prompting the New York-based financier to sell down his holdings before an anticipated fall in the shares. (more…)
COLUMN – Rogue traders, delta trading and exchange-traded funds
By Helen Parry, the views expressed are her own.
LONDON, Oct. 7 (Thomson Reuters Accelus) - There are many common features in cases of rogue or unauthorised trading, including the use by ostensibly riskless arbitrage traders of fictitious trades on internal systems to mask their unhedged positions. One obvious feature that is present in many rogue trader cases has been a failure in trade confirmation systems and controls. This feature frequently appears conterminously with the fact that a trader has intimate knowledge of and/or power and influence over middle and back office systems. (more…)
COLUMN-FSA coffee case heralds commods crackdown: John Kemp
LONDON, June 2 (Reuters) – The Financial Services Authority’s (FSA) decision to fine a London coffee broker 100,000 pounds ($146,400) and ban him from working in the financial services industry marks a significant toughening in the market abuse regime for commodities.
The banning order on Andrew Kerr marks the first successful action for market abuse in commodity markets. Kerr is accused of helping a client execute large orders during a period in which reference prices were set based on a volume-weighted average. It was a deliberate move to influence market prices in the run up to an option expiry.
While Kerr’s behaviour was unusually blatant, and unfortunately for him captured on tape in unguarded language, using large volume trades to support or batter market prices close to daily or option settlements is common practice across commodity markets.
It has been tacitly supported by much of the industry as well as the regulator. So the decision to make an example of Kerr suggests a marked tightening of the rules, or at least the way they are implemented.
LOOPHOLE IN EU REGULATIONS
I have written before that the problem stems from a conflict at the heart of the EU’s Market Abuse Regime.
The main directive (EU Directive 2003/124/EC as transposed into UK law at Section 118 of the Financial Services and Markets Act) warns about potential abuse resulting from trading in substantial volumes affecting the price of a financial instrument; large orders in a concentrated time span causing price movements that are subsequently reversed; and orders around a specific time when reference prices, settlement prices and valuations are calculated that an effect on those prices or valuations.
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