Compliance
FSA Says it Found No Plot to Manipulate UK Bank Shares
The Financial Services Authority, the UK's financial regulator, said it had found no clear evidence of a plot by market participants to manipulate the share price of UK banking group HBOS, which was hit earlier this year as rumours swirled about its ability to get funding.
"Despite the likelihood that the rumours contributed to the fall in the share price, the FSA has not uncovered evidence that they were spread as part of a concerted attempt by individuals to profit by manipulating the share price,” the FSA said in a statement.
The regulator started to investigate the matter in March this year.
“During the recent turbulence in the credit markets, there has been a lot of speculation in the press and elsewhere about banks which might be facing difficulties in obtaining funding. The pessimistic 'chatter' amongst commentators heightened after the events which led up to the emergency sale of Bear Stearns during the week ending Friday 15 and 16 March 2008,” it said.
The FSA said that on the morning of 19 March, various rumours spread that a UK bank faced funding difficulties and some rumours identified HBOS by name. At one stage, HBOS’s shares slid by more than 17 per cent.
“There is no doubt that false and damaging rumours were circulating about HBOS on 19 March 2008 and these would have had some impact on HBOS’ share price,” the FSA said. However, it added that it was difficult to say how much impact these rumours had on the share price because other forces were at work, including a lack of liquidity in the HBOS shares and the way in which quantitative share-trading systems aggravated the scale of price movements.
The FSA warned, meanwhile, that its surveillance of market activity will “continue at a very high level of intensity".
The controversy over market movements has already prompted criticism of the role of financial intermediaries, such as hedge funds. The FSA has moved to force market players to disclose their short positions in companies making rights issues. The FSA rule change was criticised by some industry groups for being difficult to interpret and enforce.