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FSA 'consent' for Insider Dealing

Criminal proceedings


The first judicial review calling into question the FSA's powers to institute criminal proceedings under sections 401 and 402 of FSMA 2000 was dismissed in the Administrative Court on 2 December 2008.

The claimants sought a judicial review of the FSA ability to institute proceedings against the claimant for offences of insider dealing contrary to s.53 Criminal Justice Act 1993 without having obtained the consent of the Secretary of State or the DPP.

The case centred on section 61(2) Criminal Justice Act 1993 and section 402(1) FSMA 2000. Section 61(2) CJA 1993 legislates that authorities which are not listed as prosecuting authorities under the 1993 Act (of which the FSA is not) are required to obtain consent to institute proceedings for insider dealing under the 1993 Act. Section 402(1) FSMA 2000 purports to confer the power on the FSA to institute proceedings for offences under Part V of the Criminal Justice Act 1993 (insider dealing).

The claimants submitted that despite section 402 of FSMA 2000, as Part V of the CJA 1993 had been transposed in its entirety into section 402 of the 2000 Act, the explicit requirement for consent in section 61(2) of CJA 1993 remained and as a result the FSA needed to obtain the consent of the DPP of the Secretary of State prior to instigating criminal proceedings for insider dealing.

The FSA, in response, submitted that when looking at the FSA's broad powers as a regulator and the objectives found in sections 2 and 6 and its ability to instigate criminal proceedings for offences contrary to the 2000 Act that it must have been the intention of Parliament that section 402(1) was to be read so as to confer upon the FSA the power to prosecute for insider dealing without the need for consent.

LJ May, in his judgment, found in favour of the FSA on this issue, finding that the structure and context of FSMA 2000 amply demonstrated that it had to have been Parliament's intention to give the FSA the power to institute proceedings under Part V of the CJA 1993 without consent. It was further held that the in the use of the words "may institute" in section 402 FSMA 2000 it was abundantly plain that the FSA had been given exactly that power.

Sarah Wallace from law firm Irwin Mitchell said: "The FSA have not opened the floodgates to large volumes of criminal prosecutions for insider dealing or market abuse. However, this result will be welcomed by the FSA confirming that under FSMA they have an unfettered ability to prosecute insider dealing cases without recourse to the DPP."