1. 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 and Brexit’ on September
Corporate governance and regulatory challenges

2. 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

3. 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

4. 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

5. 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

6. 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

7. 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

8. 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 Regulation (EU) No 596/2014 and
Directive on Criminal Sanctions for Market Abuse (2014/57/EU).
Corporate governance and regulatory challenges

9. 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

10. 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

11. 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

12. 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

13. 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

14. 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

15. 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