Super SIB looks to fines for City fraudsters
Sunday 19 October 1997
SIB, the Securities and Investments Board, has called for the introduction of civil penalties to hit various fraudsters and market manipulators in the pocket.
Traditionally regulation in the City veers between criminal proceedings and self regulation.
Although criminal sanctions are a heavy deterrent, successful prosecutions are difficult to pull off.
Self-regulation, on the other hand, has a tendency to degenerate into cozy give-and-take.
The introduction of civil penalties is seen as a third course midway between the two extremes.
High on the list of areas suitable for civil sanction is market manipulation."Manipulation damages markets because some market participants benefit unfairly at the expense of others," says Gary Sears, secretary of the Market Conduct Group at SIB.
Mr Sears also is interested in creating new laws carrying fines to stop other forms of financial abuse. These include market squeezes, where traders deliberately force up the price of a commodity by effectively cornering a market.
SIB is also concerned about the buying of shares to trigger bonus clauses in remuneration contracts. Likewise, trading to interfere with the price or settlement of derivative contracts is frowned upon.
NewRo, the super regulator which will incorporate SIB, the Securities and Futures Authority, and the Personal Investment Authority, has yet to make any statements about how it will proceed with regulation policy in the UK. However, the move by SIB will suggest that civil penalties - which are used on Wall Street, by the Securities and Exchanges Commission - will also come into operation in the UK.
There have been arguments over civil liberty issues against them. But it is generally believed that the use of civil penalties by SIB would bring a speedier, more efficient, and fairer means to dispense justice than the cumbersome court-based procedure that is used.
SIB is due to circulate a discussion document to generate debate among market participants and the public generally. The prospect of civil penalties would be welcomed by many market practitioners.
Colin Condren, head of compliance at BZW, supports the concept of civil penalties. "It seems that it works for the SEC, where you can settle without admitting liability," he said.
Another securities dealer said, "You never see the colourful characters, the big players in insider trading, being done under the current set up."
In a separate development, the proper new name of the Super SIB will be unveiled at a conference to be held a week this Tuesday.
The Chancellor, Gordon Brown will give a speech emphasising the importance of regulation to the consumer. Howard Davies, the former Deputy Governor of the Bank of England, who has been appointed head of the new giant regulator, will also give a speech. Three consultative papers will be issued, on consumer involvement, practitioner involvement, and funding for NewRo.
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