FSA takes on more staff in effort to cut market abuse

Published on Sunday 14 March 2010 19:39

BRITAIN's financial regulator is to hire 460 extra investigators after it admitted yesterday that market abuse in the financial sector remained at "an unacceptably high level".

&#149 Hector Sants: Said market abuse level is 'unacceptable'

Hector Sants, who steps down as chief executive of the Financial Services Authority (FSA) this summer, revealed that the body will boost its budget by 10 per cent, or 41 million, as part of the increased drive against wrongdoing.

This will take its budget up to 455m – with the extra staff coming on top of the 500 people it currently has dedicated to tackling enforcement and financial crime.

The expansion is being funded by a near-10 per cent rise in regulatory fees, which will boost staff numbers to 3,700 to enable the FSA to become more pro-active in policing the financial sector.

Sants said: "There's an unacceptably high level of market abuse in the UK. We need to work to reduce that."

Two of the FSA's key roles are to maintain public confidence in financial markets and to fight financial crime.

Sants said extra manpower was not due to any evidence that the UK financial services market was worse than other major financial centres such as New York, Geneva, Paris or Frankfurt.

However, Sants, himself a former investment banker, added: "But I don't think that should be our benchmark.

"Our benchmark should seek to have a market that participants really believe to be clean and fair and, as a general test, I think that if you were to ask the market participants, they would share my view that there is too much market abuse."

His comments came hard on the heels of the regulator last week securing a 21-month jail term for Malcolm Calvert, a former head of market-making at Cazenove, the Queen's broker.

This followed Calvert's conviction for insider trading in the FSA's largest prosecution to date. An FSA spokesman said after the case it was a myth that insider trading was a "victimless crime" because it undermined faith in financial markets, making many consumers victims.

The FSA is currently prosecuting two further insider dealing cases, and Sants said there were others in the pipeline.

The regulator is set to outline how it plans to utilise the additional staff when it presents its business strategy this week.

The news comes as Angela Knight, the head of the British Banking Association, said yesterday that the BBA was keen on regulatory reform but that it should not be overdone.

She said: "The UK has made more rule changes than any other country."

In terms of consumer protection, the FSA announced on Friday that it will vet products to ensure they are suitable before they go on sale, rather than focusing on helping consumers get redress once problems emerge.