Financial Services Authority

The FSA confirmed yesterday that it has commenced criminal proceedings against four former directors of a healthcare software company.  The proceedings relate to allegations concerning the offence of conspiracy to make misleading statements, contrary to section 397 of the Financial Services and Markets Act 2000 and section 1 of the Criminal Law Act 1977.

The four former directors have been summonsed to appear at City of Westminster Magistrates Court on 29 January 2010.

In November 2009 Margaret Cole, Director of the FSA's Enforcement and Financial Crime Division, gave a speech to the British Bankers Association on the FSA's agenda for fighting financial crime.  Whilst emphasising the broad work of the division, in relation to general criminal prosecutions, Ms Cole stated:

"Two essential elements in the investigation process for insider dealing and other markets offences are: access to good intelligence; and the ability to analyse it.  This is a highly specialised area, in which the FSA can claim to have massive experience, not least from conducting numerous market abuse enquiries since 2000.  Our Markets Division maintains close liaison with all the major exchanges, and can follow up suspicious trading activity quickly and expertly."

"The FSA has the tools it needs to prosecute markets cases.  Importantly, we also have the option to take cases down the regulatory market abuse route (an option which we have used frequently since 2000), and can apply civil recovery and fines to these cases.  Where the offenders are authorised by the FSA, that authorisation can be removed."

In October 2009 the FSA issued public censures against two former portfolio managers of Dresdner Kleinwort for allegations of market abuse and, in November 2009, a former corporate broker intern and his father were found guilty of insider dealing and sentenced to 12 and 24 month prison sentences respectively.

Joanne Hall from law firm Irwin Mitchell said: "Although these new charges are unlikely to herald the start of tidal wave of criminal prosecutions by the FSA, they nonetheless confirm the FSA's commitment to using its criminal law powers when they feel it is appropriate.  It is also clear that they have the support of the courts in passing sentences of imprisonment."

If you have any questions regarding the issues raised in this article please contact Sarah Wallace or Joanne Hall on 0370 1500 100 or 020 7421 3883.