Commentators sometimes compare the FCA’s spoofing case record unfavourably with that of its US counterparts. Where the FCA has pursued cases, typically the FCA has used its civil powers in relation to market manipulation rather than its criminal powers to prosecute those who create false or misleading impressions in relation to the market in or the price or value of investments. This is despite the fact that the FCA habitually adopts a dual track approach at the outset of investigations and has done so in market abuse cases for a number of years (as it now also does in relation to anti-money laundering investigations).  There are, however, signs that the FCA has cases in the pipeline.

In March this year, the FCA published a Warning Notice Statement summarising a Warning Notice it has issued in relation to an investment fund portfolio manager (and partner), whom the FCA considers deliberately engaged in market abuse over a 5 month period in 2017 contrary to Articles 12 and 15 of the Market Abuse Regulation. The FCA considers that the individual placed large orders for Contracts for Difference (referenced to five UK listed securities), which he did not intend to execute (the Misleading Orders), on the opposite side of order book to existing smaller orders, which he did intend to execute. In doing so, the FCA considers that the individual gave or is likely to have given false or misleading signals as to the supply or demand of the shares to which the Misleading Orders related, when his true intention was the opposite.  In the FCA’s view, the individual’s intention in placing the Misleading Orders was to facilitate the execution of the small orders on the opposite side of the book at a more advantageous price that he would otherwise have achieved, but for the Misleading Orders.

The summary is high level and gives no detail concerning other relevant characteristics of the order activity, including in relation to the timing of the orders (and whether/when such orders were filled and/or cancelled), pricing by reference to the best bid/offer or the portfolio manager’s trading patterns or mandate, for example. This Warning Notice remains subject to the individual’s right to make representations to the Regulatory Decision Committee (and, depending on the outcome, any appeal to the Upper Tribunal).

According to the FCA’s Enforcement annual performance report 2018/19, there may be further cases in the pipeline given that the FCA had 33 market manipulation cases open as at 31 March 2019.  Whilst we await the up-to-date figures in this year’s Enforcement annual performance report (due in July this year unless this is impacted by COVID-19 delays), it seems likely that we will see more published outcomes in 2020/21.  Whether any of the pipeline cases will involve the use of the FCA’s civil or criminal powers remains to be seen.