Recent high profile FSA enforcement actions have lent weight to the regulator’s vow to police market participants more rigorously.
The £7.2m fine the FSA handed to David Einhorn and his hedge fund Greenlight Capital last week was a coup for the regulator, which had previously warned even high profile names are not immune from sanctions.
This week, meanwhile, the former UK CEO of J. C. Flowers, Ravi Sinha, was fined £2.87m and banned from working in UK finance for sending fake invoices to a company in which the private equity house had invested.
While a more specialised case, and one unrelated to market abuse, the Sinha fine was again suggestive of an increased focus on prominent individuals.
Figures from Reynolds Porter Chamberlain reveal the FSA handed out a record £12.9m in fines to individuals last year, up 47% on 2010, showing its 'credible deterrence' policy in action.
Wilmer Hale partner Stephen Pollard, the man who represented former Barings trader Nick Leeson in the mid 1990s, said the FSA saw the Einhorn case as "another step up the ladder of increasing the effectiveness of their deterrents".
"This is part of a determined escalation from the FSA in these sorts of matters, particularly through the focus on significant market participants," Pollard said.
But Dan Hyde, a partner at Cubism Law, suggested the Einhorn case may not have been the result of a more aggressive approach by the regulator.
"I am not going to say this is a whole new world and the FSA has much sharper teeth. It may well be this fell into their laps and was a pretty obvious trade with the timing of equity issuance following on so quickly afterwards," he said.
Some suggest that after several years of professing its commitment to stamping out market abuse, the regulator has now adopted both the approach and the technology necessary to scrutinise insider trading.
"What is quite interesting here is what they have effectively said is that they accept it was not deliberate or reckless and accept he had an honestly held belief that it was not insider trading. They are saying that belief does not stand up to scrutiny," said Hyde.
"One of the FSA's serious problems is 'how do you track and identify insider dealing'? They now have sophisticated computer systems to help them to do that," Pollard said.
But with the FSA set to be split into the Financial Conduct Authority and the Prudential Regulation Authority in early 2013, White & Case counsel Charlie Monteith suggested officials had missed a valuable opportunity in rejecting earlier proposals to merge the criminal enforcement arm of the FSA and the Serious Fraud Office.
"There is clearly a heightened attempt for greater enforcement by both the FSA and the SFO. My personal opinion is it is a shame they could not have created a combined office between the two. There is an increasing overlap between them," he said.
Ultimately, Pollard believes, the FSA is willing to do more still to clamp down on those engaged in market abuse. Though the Einhorn case involved a civil penalty, he notes the regulator does not shy away from criminal prosecutions where relevant.
"They are quite bullish about their criminal prosecutions and its role as a powerful deterrent. They are not scared of prosecuting - if they can prosecute criminally they will," said Pollard.
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