Regulators are showing increasing interest in market abuse, which can include:

• Misuse of information, e.g. insider trading by an individual;
• Manipulating transactions, e.g. wash trades, abusive squeezes;
• Creating a false or misleading impression, e.g. posting false information on the internet to increase a share’s price and profit from it; and
• Distorting the market, e.g. market manipulation that interferes with normal supply and demand.

So what’s the problem?
Despite its disruptive impact, market abuse was not previously considered to be a crime. The EU Directive on Market Abuse, which came into force by 2004, is helping to remedy this situation.

The FSA’s ‘Code of Market Conduct’ also sets out what is and what is not, acceptable; it applies to a number of investments, including new products such as spread betting. The FSA has the power to impose unlimited fines on anyone engaging in market abuse.

Taking action
At Deloitte, we advise both institutions and regulators; for example, we worked with a Caribbean regulator to investigate market abuse, and proved allegations regarding market manipulation involving the US exchanges.