Signs of suspect trades in quarter of deals
Wednesday, 30 April 2008
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The UK financial watchdog has found that more than a quarter of public transactions in the UK experienced suspicious trading activity in the build-up to announcement last year. This comes just weeks after the regulator launched an investigation after one of the UK's biggest banks fell victim to market manipulation.
The Financial Services Authority yesterday published figures that showed that 28.7 per cent of UK deals in 2007 experienced "informed price movements" in the two days before official announcement.
While the figure is only slightly higher than in the previous year, it marks a rise from 23.7 per cent in 2005. The numbers, taken from a cross-section of 167 deals in 2007, were revealed in the regulator's Market Watch publication, which updates the market on its objectives for tackling insider dealing.
The FSA said in the report: "The measure for price movements ahead of public takeovers is too high and is not reducing as we would wish."
The so-called informed price movements in the run-up to a deal are not solely a result of insider dealing, the regulator said. Other factors include financial analysts and media correctly assessing likely takeover targets, strategic leaks by companies that do not necessarily constitute manipulation, and non-abusive trades that just happen to fall before an announcement.
The report follows a month after the slump in HBOS's share price as a result of potential market abuse. The UK banking group lost 20 per cent of its value in less than an hour after false speculation disseminated by short sellers caused a panic fire sale.
The FSA has launched an investigation into market manipulation in UK financial stocks. It added: "Disseminating false or misleading information, particularly in the current nervous market conditions, can be a particularly damaging form of market abuse affecting not only the company concerned, but market confidence more generally." The investigation is ongoing.
