Part

ENF Enforcement

Chapter

Sanctions for market abuse

Printed on: 30/11/2024

Rulebook at: 06/06/2005

ENF 14

Sanctions
for market abuse

ENF 14.1

Application and purpose

  • 01/12/2004

Application

ENF 14.1.1

handbook-guidance

This chapter applies to any person, whether regulated or not, who may be the subject of a financial penalty or public statement on the basis that the FSA suspects the person:

  1. (1) is or has engaged in market abuse; or
  2. (2) by taking or refraining from taking any action has required or encouraged another person or persons to engage in behaviour which, had he engaged in it himself, would amount to market abuse.
  • 01/12/2004

ENF 14.1.2

handbook-guidance
In this chapter, the expression 'market abuse cases' includes cases involving market abuse and cases involving requiring or encouraging.
  • 01/12/2004

Purpose

ENF 14.1.3

handbook-guidance
In enforcing the market abuse regime, the FSA's priority will be to protect prescribed markets from any damage to their efficiency caused by manipulation of the market and misuse of information. The FSA's effective and appropriate use of its powers to deal with market abuse cases will help ensure high standards of regulatory conduct and maintain confidence in the UK financial system, by demonstrating that high standards of market conduct are appropriately enforced in the UK financial markets. The public enforcement of these standards also furthers the FSA's public awareness regulatory objective. In addition, the enforcement of the market abuse regime will help the FSA work towards its regulatory objective of protecting consumers, as it will help to deter future market abuse by market participants, and help to reduce financial crime.
  • 01/12/2004

ENF 14.1.4

handbook-guidance
However, the FSA is also aware that the possible or actual use of its enforcement powers may have an adverse impact on the market, for example, by causing public uncertainty or affecting the timing or outcome of a takeover bid, and will take this into account.
  • 01/12/2004

ENF 14.2

Introduction

  • 01/12/2004

ENF 14.2.1

handbook-guidance

Section 124 of the Act (Statement of policy) states that the FSA must prepare and issue a statement of its policy on:

  1. (1) the imposition of penalties under section 123 (Power to impose penalties in cases of market abuse);
  2. (2) the amount of penalties under that section; and
  3. (3) the circumstances in which the FSA is to be expected to regard a person as:
    1. (a) having a reasonable belief that his behaviour did not amount to market abuse; or
    2. (b) having taken reasonable precautions and exercised due diligence to avoid engaging in market abuse.

This chapter is the FSA's statement of policy under section 124 of the Act. However, the FSA may at any time change or replace this statement of policy after consultation.

  • 01/12/2004

ENF 14.2.2

handbook-guidance
The Act gives the FSA criminal prosecution powers in relation to insider dealing and misleading statements and practices offences. The FSA's use of these powers is considered separately in ENF 15 (Prosecution of criminal offences). The Act also gives the FSA a power to impose a financial penalty, or, in certain circumstances, to ask the court to consider imposing a financial penalty on a person who has engaged in market abuse or required or encouraged (see ENF 14.3.1 G). Where the FSA is entitled to impose a financial penalty, it may publish a statement that a person has engaged in market abuse instead. These powers and the FSA's policy on their use are set out in this chapter. ENF 14 Annex 1 G G contains a diagram summarising the steps relating to action for financial penalties or public statements in market abuse cases. The FSA's Code of Market Conduct (see MAR 1), issued by the FSA under section 119 of the Act (The code), contains those provisions which the FSA considers will give appropriate guidance to those deciding whether or not behaviour amounts to market abuse or requiring or encouraging.
  • 01/12/2004

ENF 14.2.3

handbook-guidance
In addition, the Act gives the FSA power to obtain injunctions and restitution in relation to market abuse cases. These powers are described in ENF 6 (Injunctions) and ENF 9 (Restitution and redress) respectively.
  • 01/12/2004

ENF 14.3

Financial penalties and public statements in market abuse cases

  • 01/12/2004

Financial penalties

ENF 14.3.1

handbook-guidance

Under section 123(1)(a) and section 123(1)(b) of the Act (Power to impose penalties in cases of market abuse), the FSA may impose a financial penalty where a person (A):

  1. (1) is or has engaged in market abuse; or
  2. (2) by taking or refraining from taking any action has required or encouraged another person or persons to engage in behaviour which, had it been engaged in by A, would amount to market abuse.

See ENF 14.5.1 G for the factors the FSA may take into account when determining whether either of these two conditions is met.

  • 01/12/2004

ENF 14.3.2

handbook-guidance
Section 123(2) of the Act states that the FSA may not impose a penalty on a person if, having considered any representations made to it in response to a warning notice, there are reasonable grounds for it to be satisfied that:
(1) the person believed, on reasonable grounds, that his behaviour did not fall within section 123(1)(a) or section 123(1)(b) of the Act; or
(2) he took all reasonable precautions and exercised all due diligence to avoid behaving in a way which fell within section 123(1)(a) or section 123(1)(b) of the Act.
  • 01/12/2004

ENF 14.3.3

handbook-guidance
The FSA can apply to the court under section 381 of the Act (Injunctions in cases if market abuse) for an injunction restraining market abuse and under section 383 of the Act (Restitution orders in cases of market abuse) for an order for restitution in market abuse cases. In these cases, under section 129(1) of the Act (Power of court to impose a penalty in cases of market abuse), it may ask the court to consider whether the circumstances are such that a penalty should be imposed on the person concerned. In deciding whether to ask the court to impose a financial penalty, the FSA may take into account, amongst other matters, the factors set out in ENF 14.4.2 G and ENF 14.6.2 G (1) to ENF 14.6.2 G (6). The FSA's power to apply to court for injunctions and orders for restitution in market abuse cases are described in ENF 6 (Injunctions) and ENF 9 (Restitution and redress) respectively.
  • 01/12/2004

Public statements

ENF 14.3.4

handbook-guidance
Section 123(3) of the Act states that if the FSA is entitled to impose a penalty on a person under section 123(1) (see ENF 14.3.1 G and ENF 14.3.2 G) it may, instead of imposing a penalty on him, publish a statement to the effect that he has engaged in market abuse.
  • 01/12/2004

ENF 14.4

Factors relevant to determining whether to take action in market abuse cases

  • 01/12/2004

ENF 14.4.1

handbook-guidance
Not all cases involving market abuse or requiring or encouraging will warrant enforcement action. The FSA will consider all the relevant circumstances of the case when deciding whether to seek to impose a financial penalty or, where it is entitled to impose a financial penalty, whether a public statement would be more appropriate.
  • 01/12/2004

ENF 14.4.2

handbook-guidance

When it decides whether to take action for behaviour appearing to the FSA to amount to market abuse or requiring or encouraging, the FSA may take into account a number of factors. The following list is not exhaustive: not all of these factors may be relevant in a particular case, and there may be other factors that are relevant.

  1. (1) The nature and seriousness of the suspected behaviour, including:
    1. (a) the nature and seriousness of any breach of the Code of Market Conduct;
    2. (b) whether the behaviour was deliberate or reckless;
    3. (c) the duration and frequency of the behaviour;
    4. (d) the impact of the behaviour on prescribed markets, including whether public confidence in those markets has been damaged; and
    5. (e) the amount of any benefit gained or loss avoided as a result of the behaviour; and
    6. (f) the loss or risk of loss caused to consumers or other market users.
  2. (2) The conduct of the person concerned after the behaviour was identified, including the following.
    1. (a) How quickly, effectively and completely the person brought the behaviour to the attention of the FSA or another relevant regulatory authority.
    2. (b) The degree of cooperation the person showed during the FSA's investigation of the behaviour of concern or during those of any other regulatory authority (for example, the Takeover Panel or an RIE) which is allowed to share information obtained during an investigation with the FSA. In this context, persons are reminded that they may have a duty to co-operate with other regulatory authorities. For example, MAR 4.3.4 G requires firms to whom that rule applies to assist the Takeover Panel in certain circumstances. However, a person will not necessarily avoid action for market abuse or requiring or encouraging merely by fulfilling a duty to co-operate.
    3. (c) Any remedial steps that the person has taken to address the behaviour, whether on his own initiative or in meeting the requirement of another regulatory authority, and how promptly that person has taken those steps. This might include identifying those who have suffered loss and compensating them, taking disciplinary action against staff (where appropriate), and taking action designed to ensure that similar problems do not arise in the future. It might also include (for example, in the context of a takeover bid) any steps taken to correct a misleading statement or misleading impression or distortion of the market. However, a person will not necessarily avoid a penalty merely by fulfilling a duty to take remedial action.
    4. (d) Whether the person concerned has complied with any requirements or rulings of another regulatory authority relating to his behaviour (for example, where relevant, those of the Takeover Panel or an RIE).
    5. (e) The nature and extent of any false or inaccurate information given by the person and whether the information appears to have been given in an attempt knowingly to mislead the FSA.
  3. (3) The degree of sophistication of the users of the market in question, the size and liquidity of the market, and the susceptibility of the market to market abuse. For example, where the users of a market are generally not market professionals, and they have suffered loss as a result of the behaviour and that loss has not been promptly or adequately compensated for by the person concerned, this may be a factor in favour of the imposition of a penalty (this does not, however, mean that the FSA will not take action to impose financial penalties on persons whose behaviour falls within the market abuse provisions where only market professionals have suffered).
  4. (4) Action taken by other regulatory authorities. Where other regulatory authorities propose to take action in respect of the behaviour which is under consideration by the FSA, the FSA will consider whether their action would be adequate to address the FSA's concerns, or whether it would be appropriate for the FSA to take its own action. For example, the FSA has powers to impose unlimited financial penalties, whereas an RIE's powers may be more limited in a particular case. Where the behaviour of the person concerned is also, in the opinion of the Takeover Panel, a breach of that person's responsibilities under the Takeover Code, the FSA would not expect to use its powers under the market abuse regime against that person, except in the circumstances described in ENF 14.9.6 G. If the FSA considers that using its powers may be appropriate in those circumstances, it will not take action during the bid except in the circumstances described in ENF 14.9.7 G.
  5. (5) Action taken by the FSA in previous similar cases. The FSA will take account of action it has taken previously in market abuse cases where the behaviour has been the same or similar.
  6. (6) The impact, having regard to the nature of the behaviour, that any financial penalty or public statement may have on the financial markets or on the interests of consumers:
    1. (a) a penalty may show that high standards of market conduct are being enforced in the financial markets, and may bolster market confidence;
    2. (b) a penalty may protect the interests of consumers by deterring future market abuse and improving standards of conduct in a market;
    3. (c) in the context of a takeover bid, the FSA may consider that the impact of the use of its powers is likely to have an adverse effect on the timing or outcome of that bid, and therefore it would not be in the interests of financial markets or consumers to take action for market abuse during the takeover bid. If the FSA considers that the proposed use of its powers may have that effect, it will consult the Takeover Panel and give due weight to its views.
  7. (7) The likelihood that the same type of behaviour (whether on the part of the person concerned or others) will happen again if no action is taken.
  8. (8) The disciplinary record and general compliance history of the person, including:
    1. (a) whether the FSA has taken any previous action against the person for market abuse or requiring or encouraging which resulted in adverse findings;
    2. (b) whether the conduct of the person in relation to the markets has caused concern to another regulatory authority or been the subject of a warning or other action by a regulatory authority;
    3. (c) whether the person has previously given any undertakings to the FSA not to engage in particular behaviour; and
    4. (d) the general compliance history of the person, such as previous private warnings (see ENF 11.3).
  • 01/12/2004

ENF 14.5

Factors determining whether the FSA may impose a financial penalty in market abuse cases

  • 01/12/2004

ENF 14.5.1

handbook-guidance

The factors which the FSA may take into account when deciding whether either of the two conditions in ENF 14.3.2 G is met, include, but are not limited to:

  1. (1) in relation to whether the person concerned reasonably believed that his behaviour did not amount to market abuse or requiring or encouraging
    1. (a) whether, and if so to what extent, the person concerned took reasonable precautions to avoid engaging in market abuse or requiring or encouraging (see (2));
    2. (b) whether, and if so to what extent, the behaviour in question was or was not analogous to behaviour described in the Code of Market Conduct (see MAR 1) as amounting or not amounting to market abuse or requiring or encouraging;
    3. (c) whether the FSA has issued any guidance on the behaviour in question and if so, the extent to which the person sought to follow that guidance (see the Reader's Guide part of the Handbook regarding the status of guidance);
    4. (d) whether, and if so to what extent, the behaviour complied with the rules of any relevant prescribed market or any other relevant market or other regulatory requirements (including the Takeover Code or the SARs) or any relevant codes of conduct or best practice;
    5. (e) the level of knowledge, skill and experience to be expected of the person concerned; and
    6. (f) whether, and if so to what extent, the person can demonstrate that the behaviour was engaged in for a legitimate purpose and in a proper way;
  2. (2) in relation to whether the person concerned took all reasonable precautions and exercised all due diligence to avoid engaging in market abuse or requiring or encouraging:
    1. (a) whether, and if so to what extent, the person followed internal consultation and escalation procedures in relation to the behaviour (for example, did the person discuss the behaviour with internal line management and/or internal legal or compliance departments);
    2. (b) whether, and if so the extent to which, the person sought any appropriate expert legal or other expert professional advice and followed that advice;
    3. (c) whether, and if so to what extent, the person sought advice from the market authorities of any relevant prescribed market or, where relevant, consulted the Takeover Panel, and followed the advice received;
    4. (d) whether the FSA has issued any guidance on the behaviour in question and if so, the extent to which the person has sought to follow that guidance (see the Reader's Guide part of the Handbook regarding the status of guidance); and
    5. (e) whether, and if so to what extent, the behaviour complied with the rules of any relevant prescribed market or any other relevant market or other regulatory requirements (including the Takeover Code or the SARs) or any relevant codes of conduct or best practice.
  • 01/12/2004

ENF 14.5.2

handbook-guidance
The list in ENF 14.5.1 G is not exhaustive, and there may be other factors that are relevant in establishing the conditions referred to in ENF 14.3.2 G, depending on the facts of each case.
  • 01/12/2004

ENF 14.6

FSA's choice of powers: financial penalties/public statements

  • 01/12/2004

ENF 14.6.1

handbook-guidance
As with statements of public censure issued for other breaches of the requirements of the Act (see ENF 12), the FSA will consider whether to publish a statement that market abuse has occurred instead of imposing a financial penalty where it considers that such a statement may more appropriately address the particular behaviour in question.
  • 01/12/2004

ENF 14.6.2

handbook-guidance

When considering whether a public statement is more appropriate than a financial penalty the FSA will take into account all the circumstances of the case. In particular, the FSA may have regard to factors similar to those in ENF 12.3.3 G. Those factors include the following.

  1. (1) If the person has made a profit or avoided a loss as a result of the behaviour, this may be a factor in favour of a financial penalty, on the basis that a person should not be allowed to benefit from market abuse or requiring or encouraging.
  2. (2) If the behaviour is serious in nature or degree, this may be a factor in favour of a financial penalty, on the basis that the sanction should reflect the seriousness of the behaviour (other things being equal, the more serious the behaviour, the more likely the FSA is to impose a financial penalty).
  3. (3) If the person has admitted the behaviour and provides full and immediate cooperation to the FSA, and takes steps to ensure that those who have suffered loss due to the behaviour are fully compensated, this may be a factor in favour of a public statement, rather than a financial penalty, depending on the nature and seriousness of the behaviour.
  4. (4) The FSA's approach in similar previous cases. The FSA will seek to achieve a consistent approach to its decisions on whether to impose a financial penalty or issue a public statement.
  5. (5) If the person has a poor compliance history. For example, where the FSA has previously taken action against the person for behaviour amounting to market abuse or requiring or encouraging which resulted in adverse findings, this may be a factor in favour of a financial penalty.
  6. (6) The impact of a financial penalty on the person concerned. In exceptional cases, if the person has inadequate means (excluding any manipulation or attempted manipulation of their assets) to pay the financial penalty which the behaviour would otherwise attract, this may be a factor in favour of a lower level of penalty or a public statement. Circumstances in which the FSA may be willing to issue a public statement include where there is verifiable evidence that the person would suffer serious financial hardship if it imposed a financial penalty.
  • 01/12/2004

ENF 14.6.3

handbook-guidance
The list of factors in ENF 14.6.2 G is not exhaustive. Not all the factors may be relevant in a particular case, and there may be others that are relevant.
  • 01/12/2004

ENF 14.7

Determining the level of a financial penalty in a market abuse case

  • 01/12/2004

ENF 14.7.1

handbook-guidance
The FSA's approach to financial penalties in market abuse cases will be consistent with its approach to financial penalties in other disciplinary cases concerning firms and approved persons (see ENF 13.3).
  • 01/12/2004

ENF 14.7.2

handbook-guidance
The FSA will take into account all the circumstances of a case when it determines the appropriate level of penalty, if any. The FSA does not propose to use a tariff of penalties for market abuse cases, given the wide range of different types of behaviour that may amount to market abuse or requiring or encouraging.
  • 01/12/2004

ENF 14.7.3

handbook-guidance
Section 124(2) of the Act (Statement of policy) states that the FSA's policy in determining the amount of a penalty must include having regard to: (a) whether the behaviour in respect of which the penalty is to be imposed had an adverse effect on the market in question and, if it did, how serious that effect was; (b) the extent to which that behaviour was deliberate or reckless; and (c) whether the person on whom the penalty is to be imposed is an individual.
  • 01/12/2004

ENF 14.7.4

handbook-guidance

The FSA considers that the factors which may be relevant when it sets the amount of a penalty in market abuse cases include, the following.

  1. (1) Adverse effect on markets and the seriousness of that effect.
  2. A financial penalty must be in proportion to the nature and seriousness of the abuse in question. The following may be relevant:
    1. (a) the loss or risk of loss caused to consumers or other market users;
    2. (b) the duration and frequency of the behaviour; and
    3. (c) the impact of the behaviour on the orderliness of prescribed markets including whether confidence in those markets has been damaged.
  3. (2) The extent to which the behaviour was deliberate or reckless.In determining whether the behaviour was deliberate or reckless, the FSA will take into account all the circumstances of the behaviour which resulted in the market abuse or requiring or encouraging. For example, the FSA may have regard to whether the person intended or foresaw the consequences of their behaviour, or gave any consideration to the consequences of their behaviour. If the FSA decides that the behaviour was deliberate or reckless, it would be more likely to impose a higher penalty on a person than would otherwise be the case.
  4. (3) Whether the person on whom the penalty is to be imposed is an individual.This will include having regard to the financial resources and other circumstances of the individual and may include whether there is verifiable evidence of serious financial hardship or financial difficulties if the individual were to pay the financial penalty that would, in the absence of this consideration, be imposed (see also the discussion of this factor in ENF 13.3.3 G (3)).
  5. (4) The amount of profits accrued or loss avoided.The FSA may have regard to the amount of profits accrued or loss avoided as a result of the behaviour, for example:
    1. (a) the FSA will propose a penalty that is consistent with the principle that a person should not benefit from behaviour amounting to market abuse or requiring or encouraging; and
    2. (b) the penalty should also act as an incentive to the person and others to comply with required standards of market conduct.
  6. (5) Conduct following the behaviour of concern.The FSA may take into account:
    1. (a) the conduct of the person in bringing (or failing to bring) the behaviour to the FSA's attention (or the attention of other regulatory authorities, where relevant) quickly, effectively and completely;
    2. (b) the degree of co-operation the person showed during the investigation of the behaviour by the FSA or any other regulatory authority allowed to share information with the FSA, such as an RIE or the Takeover Panel. (In this context, persons are reminded that they may have a duty to co-operate with other regulatory authorities; for example, MAR 4.3.4 G requires firms to whom that rule applies to assist the Takeover Panel in certain circumstances). Where a person has fully cooperated with an investigation, this will be a factor tending to reduce the level of financial penalty;
    3. (c) any remedial steps taken by the person since the behaviour was identified (whether on their own initiative or that of the FSA or another regulatory authority) including correcting any misleading statement or impression, identifying whether consumers or other market users have suffered loss and compensating them, taking disciplinary action against staff involved (if appropriate), and taking steps to ensure similar problems do not happen in the future; and
    4. (d) whether the person concerned has complied with any requirements or rulings of another regulatory authority relating to his behaviour (for example, where relevant, those of the Takeover Panel).
  7. (6) Disciplinary record and compliance history.The disciplinary record and general compliance history of the person may be taken into account, including whether the FSA has previously taken any action against the person for behaviour amounting to market abuse or requiring or encouraging which resulted in adverse findings. For example, the compliance history of a person could lead to the FSA increasing the penalty where the person has engaged in behaviour falling within ENF 14.3.1 G (1) or ENF 14.3.1 G (2). In assessing the relevance of a person's compliance history, the age of the previous behaviour will be taken into account, although a long-standing matter may still be relevant. However, in undertaking this assessment, private warnings will not be taken into account.
  8. (7) Previous action taken by the FSA.The action the FSA has taken over previous similar behaviour may be taken into account. The FSA will seek to ensure consistency when it determines the appropriate level of penalty. For example, any disciplinary action taken in relation to similar market abuse cases will clearly be a relevant factor. However, as stated at ENF 14.7.2 G, the FSA does not intend to set up a tariff system and there may be other relevant factors which could increase or decrease the seriousness of the matter.
  9. (8) Action taken by other regulatory authorities.Action taken or to be taken by other regulatory authorities (for example, the Takeover Panel or an RIE) in relation to the behaviour may be relevant. The degree to which any remedial or compensatory steps required by other regulatory authorities have been taken (and whether taken promptly) may also be relevant.
  • 01/12/2004

ENF 14.7.5

handbook-guidance
The factors listed in ENF 14.7.4 G are not exhaustive, and all the relevant circumstances of the case will be taken into consideration.
  • 01/12/2004

ENF 14.7.6

handbook-guidance
A person may ask the FSA to permit the person to pay a financial penalty in a market abuse case by instalments. However, the FSA will consider agreeing to payment of a financial penalty by instalments only where there is verifiable evidence of serious financial hardship or financial difficulties if the person were required to pay the full payment in a single instalment. This reflects the fact that the purpose of a penalty is not to render a person insolvent or to threaten solvency. The FSA will determine the appropriate level and number of instalments having regard to the overall circumstances of the case. However, the period within which the full payment of the penalty must be made will not generally exceed one year from the date of the final notice.
  • 01/02/2003

ENF 14.8

Market abuse and breaches of the FSA Principles

  • 01/12/2004

ENF 14.8.1

handbook-guidance
Principle 5 (Market conduct) (see PRIN 2.1.1 R) requires a firm to observe proper standards of market conduct. Any behaviour which constitutes market abuse or requiring or encouraging will also constitute a breach of Principle 5. Where the principal mischief arising from the behaviour appears to be market abuse or requiring or encouraging, the FSA will take enforcement action under the market abuse regime rather than as a breach of Principle 5.
  • 01/12/2004

ENF 14.8.2

handbook-guidance
Behaviour which breaches Principle 5 may not necessarily be market abuse under section 118 of the Act (Market abuse). So, where the principal mischief arising from the behaviour appears to be a breach of Principle 5, and the FSA is satisfied that it would not be appropriate to deal with the case under the market abuse regime, it will take enforcement action as a breach of the Principles (together with other breaches of other rules, if relevant). However, where it is unclear or arguable where the principal mischief lies, the FSA may take enforcement action as a breach of the Principles (and, if relevant, breaches of other rules) and in the alternative, for market abuse or requiring or encouraging. Enforcement of the Principles is considered further in ENF 11.6 (Discipline for breaches of Principles for Businesses).
  • 01/12/2004

ENF 14.9

Action involving other UK regulatory authorities

  • 01/12/2004

ENF 14.9.1

handbook-guidance
As stated in ENF 11.8 (Action involving other regulatory authorities), some market abuse cases may involve not only potential action by the FSA, but also potential action by other regulatory authorities. In relation to behaviour which may have occurred or be occurring on a prescribed market, the FSA will refer to the relevant RIE and give due weight to its views. In a case where the FSA considers that it would be appropriate to bring action against a person under the market abuse regime, the relevant RIE may also wish to bring action against the person for breaches of its own rules. In each case, the FSA will coordinate action with the RIE concerned to ensure that cases are dealt with effectively and fairly, under operating arrangements [to be agreed] between the FSA and the RIEs. The FSA will have regard to all the circumstances of the case, including whether the other regulatory authorities have adequate powers to address the behaviour in question.
  • 01/12/2004

ENF 14.9.2

handbook-guidance
In relation to behaviour which may have happened or be happening in the context of a takeover bid or to which the SARs are relevant, the FSA will refer to the Takeover Panel and give due weight to its views. Where the Takeover Codeor SARs has procedures for complaint about any behaviour, the FSA expects parties to exhaust those procedures. The FSA will not, save in exceptional circumstances, take action under any of section 123 (FSA's power to impose penalties), section 129 (Power of court to impose penalties), section 381 (Injunctions - see ENF 6), sections 383 or 384 (Restitution - see ENF 9) in respect of behaviour to which the Takeover Codeor SARs are relevant before the conclusion of the procedures available under the Takeover Code or the SARs, as the case may be.
  • 01/12/2004

ENF 14.9.3

handbook-guidance
The FSA will not take action against a person over behaviour which (a) conforms with the Takeover Code or rules of an RIE and (b) falls within the terms of any provision of the Code of Market Conduct which states that behaviour so conforming does not amount to market abuse. The FSA will seek the Takeover Panel's or relevant RIE's views on whether behaviour complies with the Takeover Code or RIE rules and will attach considerable weight to its views.
  • 01/12/2004

ENF 14.9.4

handbook-guidance
If any of the circumstances in ENF 14.9.6 G apply, and the FSA considers that the use of its disciplinary powers under section 123 or 129, or of its injunctive powers under section 381 or of its powers relating to restitution under section 383 or 384 is appropriate, it will not take action during an offer to which the Takeover Codeor SARs apply except in the circumstances set out in ENF 14.9.7 G.
  • 01/12/2004

ENF 14.9.5

handbook-guidance
In any case where the FSA considers that the use of its powers under any of sections 123, 129, 381, 383 or 384 of the Act may be appropriate, if that use may affect the timetable or outcome of a takeover bid or a tender offer governed by the SARs, it will consult the Takeover Panel before using any of those powers.
  • 01/12/2004

ENF 14.9.6

handbook-guidance

Where the behaviour of a person which amounts to market abuse is behaviour to which the Takeover Codeor the SARs are relevant, the use of the Takeover Panel's informal powers will often be sufficient to address the relevant concerns. In cases where this is not so, the FSA will need to consider, against the background of this manual, whether it is appropriate to use any of its own powers under the market abuse regime. The principal circumstances in which the FSA is likely to consider such exercise are:

  1. (1) where the Takeover Panel is unable to investigate properly due to lack of cooperation by the relevant person;
  2. (2) where the behaviour falls within sections 118(2)(a) of the Act; (Information not generally available);
  3. (3) where a person has deliberately or recklessly failed to comply with a Takeover Panel ruling;
  4. (4) where the FSA's approach in previous similar cases (which may have happened otherwise than in the context of a takeover bid) suggests that a financial penalty should be imposed (see ENF 14.6.2 G (4));
  5. (5) where the Takeover Panel asks the FSA to consider the use of its powers to impose a financial penalty;
  6. (6) where the behaviour extends to securities or a class of securities which may be outside the Takeover Panel's jurisdiction;
  7. (7) where the behaviour threatens or has threatened the stability of the financial system; and
  8. (8) where for any other reason the Takeover Panel asks the FSA to consider the use of any of its powers referred to in ENF 14.9.2 G.
  • 01/12/2004

ENF 14.9.7

handbook-guidance
The exceptional circumstances in which the FSA will consider the use of powers during a takeover bid are listed in ENF 14.9.6 G (1) to ENF 14.9.6 G (3), ENF 14.9.6 G (6), ENF 14.9.6 G (7) and, depending on the circumstances, ENF 14.9.6 G (8).
  • 01/12/2004

ENF 14.9.8

handbook-guidance
The guidance given in ENF 14.9.6 G and ENF 14.9.7 G does not apply to a person who has no responsibilities under the Takeover Code.
  • 01/12/2004

ENF 14.9.9

handbook-guidance
Where the FSA proposes to publish details of financial penalties it has imposed in relation to behaviour which has happened in the context of a takeover bid, it will consult the Takeover Panel over the timing of publication where the FSA is of the opinion that publication may affect the timetable or outcome of that bid, and will give due weight to the Takeover Panel's views.
  • 01/12/2004

ENF 14.10

The FSA's endorsement of the Takeover Code and the SARs

  • 01/12/2004

ENF 14.10.1

handbook-guidance
The FSA has made rules under section 143 of the Act (Endorsement of codes etc.) endorsing the Takeover Code and the SARs. The effect of the FSA's endorsement in MAR 4.2.1 R is that, under section 143 of the Act:
(1) at the request of the Takeover Panel, the FSA may take enforcement action against a firm which breaches the Takeover Code or the SARs under Part IV (Variation of permission - see ENF 3), Part XIII (Intervention against incoming firms - see ENF 4), Part XIV (Disciplinary measures - see ENF 11, ENF 12 and ENF 13) and Part XXV (Injunctions and restitution - see ENF 6 and ENF 9);
(2) at the request of the Takeover Panel, the FSA may take enforcement action against an approved person under section 66(2)(b) of the Act (Disciplinary powers - see ENF 11).
  • 01/12/2004

ENF 14.10.2

handbook-guidance
Section 143(5) of the Act states that 'a failure to comply with a requirement imposed, or ruling given, under an endorsed provision is to be treated as a failure to comply with the endorsed provision under which that requirement was imposed or ruling was given'. So the FSA may take enforcement action as described in ENF 14.10.1 G where there has been a failure of this kind.
  • 01/12/2004

ENF 14.10.3

handbook-guidance
A breach of the Takeover Code or the SARs, or being knowingly concerned in a breach by another person, may also be relevant to enforcement action taken by the FSA on other grounds, including:
(1) withdrawal of approval under section 63 of the Act (Withdrawal of approval) on the basis that an approved person is not fit and proper (see ENF 7); and
(2) making a prohibition order against a person under section 56 of the Act (Prohibition orders - see ENF 8).
  • 01/12/2004

ENF 14.10.4

handbook-guidance
The FSA is only able to take enforcement action under section 143 of the Act in respect of a breach of the Takeover Code or the SARs at the request of the Takeover Panel. However, if the behaviour in question, leaving aside any breach of the Takeover Code or the SARs, could also constitute a breach of the rules, or in relation to an approved person, a Statement of Principle, the FSA may use its enforcement powers whether a request has been received from the Takeover Panel or not. In that situation, however, the FSA will consult the Takeover Panel and give due weight to its views.
  • 01/12/2004

ENF 14.11

Action involving overseas authorities

  • 01/12/2004

ENF 14.11.1

handbook-guidance
In certain circumstances, behaviour that takes place outside the United Kingdom may damage the integrity of prescribed markets. The FSA's Code of Market Conduct (see MAR 1.2.9 G) contains guidance on the circumstances in which behaviour outside the United Kingdom may amount to market abuse or requiring or encouraging.
  • 01/12/2004

ENF 14.11.2

handbook-guidance
Where behaviour that has taken place overseas amounts to market abuse or requiring or encouraging, the FSA will consider whether it is appropriate to impose a financial penalty or issue a public statement about the person concerned. When deciding whether to impose a sanction in these circumstances the FSA may consider the factors in ENF 14.4. In addition to these factors, the FSA will consider the extent to which the abusive behaviour is capable of being dealt with by action by the relevant overseas regulator or other enforcement agency. The FSA will consider in each case whether it is appropriate for it or another enforcement agency to take action.
  • 01/12/2004

ENF 14.11.3

handbook-guidance
In some cases both the FSA and the relevant overseas regulator (or other enforcement agency) may have an interest in taking enforcement action against the person concerned. For example, if the behaviour involves a breach of relevant rules or laws of the overseas jurisdiction as well as the market abuse provisions of the UK legislation it may be appropriate for both the FSA and the overseas authority or agency to take action. In those circumstances, the FSA will work with the relevant overseas authorities to coordinate effective enforcement action.
  • 01/12/2004

ENF 14.12

Decision making procedure and publication of sanctions

  • 01/12/2004

ENF 14.12.1

handbook-guidance
The Act requires the FSA to issue a warning notice, decision notice and final notice before imposing a financial penalty or issuing a statement. More information on the procedure the FSA will follow in these circumstances is contained in DEC.
  • 01/12/2004

ENF 14.12.2

handbook-guidance
The FSA will ordinarily publicise a financial penalty or statement by issuing a press release giving details of the behaviour and the sanction imposed. However, the Act provides that the FSA may not publish information in those circumstances where it would be unfair to the person on whom a sanction is imposed, or prejudicial to the interests of consumers.
  • 01/12/2004

ENF 14 Annex 1

Action for financial penalties or public statements in market abuse cases

  • 01/12/2004

handbook-guidance
Action for financial penalties or public statements in market abuse cases
  • 01/12/2004