Dr. Nicholas Ryder Professor in Financial Crime 28th September 2017 Market manipulation challenges and responses in the United Kingdom, European Union and United States Dr. Nicholas Ryder Professor in Financial Crime 28th September 2017 ‘Timeliness and timelessness-Corporate governance and regulatory challenges after the financial crisis of 2007-2009 and Brexit’ on September 28 2017 Corporate governance and regulatory challenges

Corporate governance and regulatory challenges Abstract This paper investigates the impact of market abuse and insider trading – under the umbrella label market manipulation – as representing a particularly useful test case for the interrelationship between financial crime and the global financial turmoil. The aim of this paper is to explore how the regulatory responses have changed over since the start of the 2007 financial. Corporate governance and regulatory challenges

Corporate governance and regulatory challenges Introduction The financial crisis and financial crime Definitions Policy Background and Response The Law Proceedings United Kingdom United States of America European Union Conclusions Corporate governance and regulatory challenges

The financial crisis and financial crime A significant factor is financial crime: Subprime Mortgages and Mortgage Fraud, Credit Rating Agencies, Predatory Lending, Ponzi Fraud Schemes Market Misconduct, and Market Manipulation (Ryder, 2014; Ryder et al 2014, Ryder et al 2017 and Ryder 2017) Corporate governance and regulatory challenges

Corporate governance and regulatory challenges Definitions Market Manipulation: “It can include making false or misleading statements and completing transactions that have the purpose of giving a false impression about supply or demand” (Action Fraud) “Artificially raising or lowering the price of stock” (FBI) “Intentional conduct designed to deceive investors by controlling or artificially affecting the market” (SEC) Spreading false or misleading information about a company; improperly limiting the number of publicly-available shares; or rigging quotes, prices or trades to create a false or deceptive picture of the demand for a security and orchestrated stock purchases or sales designed to inflate or deflate the true sales volume, demand, and ultimately, price of a stock. Corporate governance and regulatory challenges

Corporate governance and regulatory challenges Definitions Insider Dealing: Illegal trading in shares or securities by someone (Harrison and Ryder, 2017), “trading in organised securities markets by persons in possession of material non-public information” (Alexander, 2001) Descriptions of behaviour that amount to insider dealing (See MAR Insider Dealing 1.3) Corporate governance and regulatory challenges

Corporate governance and regulatory challenges Definitions Market abuse: insider dealing, improper disclosure, market manipulation; behaviour giving rise to false and misleading impressions; misuse of information; and behaviour that is likely to give rise to market distortion (Harrison and Ryder, 2016). Corporate governance and regulatory challenges

Policy Background and Response US Influence EU Influence Securities and Exchange Act (1934), Insider Trading Sanction Act (1984), Insider Trading and Securities Fraud Enforcement Act (1988) and The Sarbanes Oxley Act (2002). Insider Dealing Directive 89/592/EEC, Market Abuse Directive 2003/6 ([2003] OJ L96/16), Market Abuse Regulation 2014 Regulation (EU) No 596/2014 and Directive on Criminal Sanctions for Market Abuse (2014/57/EU). Corporate governance and regulatory challenges

Policy Background and Response United Kingdom Insider Dealing: Criminal Justice Act (1993) Market Abuse: Financial Services and Markets Act (2000) Offences leading to Financial Services: S. 89 Financial Services Act 2012 S. 90 Financial Services Act 2012 S. 91 Financial Services Act 2012 Corporate governance and regulatory challenges

Civil Proceedings: The United Kingdom 2015: Deutsche Bank £227m (FCA) Barclays £284m (FCA) 2014: Lloyds Bank and Bank of Scotland, £105m (FCA) Martin Brokers (UK) Ltd £630,000 (FCA) 2013: Rabobank, £105m (FCA) ICAP Europe Ltd, £14m (FCA) Royal Bank of Scotland, £85m (FCA) 2012: UBS AB, £160m (FCA) Barclays Bank, £59.5m (FCA) Corporate governance and regulatory challenges

Corporate governance and regulatory challenges Criminal Proceedings R v Tom Hayes, Southwark Crown Court, 3rd August 2015 Convicted of conspiracy to defraud Sentenced to 14 years imprisonment The SFO stated: “The jury were sure that in his admitted manipulation of Libor, Hayes was indeed dishonest. The verdicts underline the point that bankers are subject to the same standards of honesty as the rest of us”. Appealed sentence (September, 2015), reduced in December 2015 to 11 years Corporate governance and regulatory challenges

Unused statutory provisions Theft Act 1968, Enterprise Act 2002 (s.188), Fraud Act 2006 (s. 2-4), Financial Services Act 2012 (s. 89, 90 and 91), Financial Services (Banking Reform) Act 2013 (s. 36) and Common law offence of conspiracy to defraud. Corporate governance and regulatory challenges

United States of America Civil Proceedings Criminal Proceedings Deutsche Bank, $1.7bn (DoJ, 2017) Barclays Bank, $200m (CFTC, 2012) UBS, $1.5bn (CFTC, 2012) RBS, $325m (CFTC, 2013) ICAP, $65m (CFTC, 2013) 6 banks $1.6bn (2015, Federal Reserve) Anthony Allen and Anthony Conti were convicted in November 2015 of manipulating LIBOR, Convictions overturned by appeal court in July 2017. Corporate governance and regulatory challenges

Corporate governance and regulatory challenges European Union JP Morgan was fined €337m (European Commission, 2016), HSBC €33m (European Commission, 2016), Credit Agricole €114m (European Commission, 2016), 8 International financial institutions fined €1.49bn (European Commission, 2013) Corporate governance and regulatory challenges

Conclusions and Questions Lack of accountability? Credible deterrence? Reform of criminal law insufficient? More fines to follow? Corporate liability for economic crime: call for evidence, Introduction of the corporate death penalty? Corporate governance and regulatory challenges