FSA to have new market abuse powers

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LONDON – The UK Financial Services Authority (FSA) is to be given new powers to combat market abuse – including the granting of legal immunity to informers, according to the government’s chancellor of the exchequer Alastair Darling.

Darling, who made the remarks in a newspaper interview, said the plans follow false rumours spread about the finances of Halifax Bank of Scotland (HBOS), leading to a 17% reduction in the British bank’s share price.

“There has been a series of completely unfounded rumours about UK financial institutions in the London market over the last few days, sometimes accompanied by short-selling,” said an FSA statement last week.

The reforms would give the UK financial watchdog powers similar to those of the US Securities and Exchange Commission (SEC) but denied to UK financial authorities for years.

The FSA and SEC employ similar numbers of staff – 2,740 and 3,500 respectively – but whereas half the total at the SEC work in law enforcement, the figure at the FSA is only about 200.

In addition to the HBOS rumours, recent rogue trader scandals at French bank Société Génerale and Bermuda broker MF Global have highlighted the huge risks of financial crime.

In London, investment bank Lehman Brothers recently launched an investigation into irregularities by equity traders, while City confidence remains shaken in the wake of the bungled Northern Rock bail out.