Standards

FSA warns activists on market abuse

The Financial Services Authority (FSA) has warned activist investors against conspiring in order to implement their strategy.

The FSA drew particular attention to investors pursuing a joint strategy, but acquiring shares independently in order to avoid market disclosures that would be necessary if the shares were bought by a single party. Such behaviour, said the FSA, might amount to market abuse.

The regulator also warned of the potential for abuse in an investor deliberately setting out to generate a false rumour of future corporate conduct knowing that it, or its associates, may be able to take advantage of a short-term movement in the company’s share price.

The Independent’s Jeremy Warner (25 May) suggested it is somewhat worrying the FSA found it necessary to clarify this point, and makes you wonder what on earth everyone has been up to. He reported that the regulator’s statement was apparently in response to requests for guidance in connection with dealings in shares of ABN Amro, the Dutch bank currently facing bids from two rival banking groups.

The Financial Times’ Lombard said the reason such long-standing principles need to be reiterated is simply that, the more activist funds that exist, the more likely one will overstep the mark.

June 2007