Failure to Prevent Market Abuse: A Potential New Corporate Criminal Offence?

Abstract

On 7 April 2020, the Financial Conduct Authority (FCA) published its 2020/21 Business Plan, in which the regulator renewed its commitment to developing clean markets, robust in their resistance to the threat of market abuse (FCA Business Plan 2020/ 21 accessible athttps://www.fca.org.uk/publication/businessplans/ business-plan-2020-21.pdf.). In its statement, the regulator, facing growing instability in the markets brought about by the COVID-19 pandemic, warned against the risk posed by the ‘opportunity for poor behaviour’, cautioning that where the FCA finds poor practice it would ‘clamp down with all relevant force’. This posturing is not new: rooting out and punishing market abuse has consistently been a high priority for the regulator in meeting its key statutory objectives of protecting consumers, enhancing market integrity and promoting competition (Financial Services and Markets Act 2000, section 1b.). Set against the increasing likelihood that the UK economy is about to enter a deep phase of recession, this focus shows no sign of abating. However, there remains ongoing debate over the most effective means of neutralizing the threat posed by market abusers. One potential model, already developed in other areas of economic crime – specifically in the area of corporate bribery and tax offending – is an extension of the so-called failure to prevent (‘FTP’) model of corporate liability (3 April 2019, Lisa Osofsky ‘Fighting fraud and corruption in a shrinking world’ available at https://www.sfo.gov.uk/2019/ 04/03/fighting-fraud-and-corruption-in-a-shrinking-world/.). This approach would see a shift away from the ‘identification’ principle, in which corporate criminal liability is predicated on establishing a ‘directing mind and will’ of the company and towards a focus on wider corporate malfeasance. While the desire for such an extension of liability is easy to understand from a regulatory perspective, the existing FTP model in force in this country, in the area of corporate bribery and tax offending, requires close examination before serious consideration is given to such a course, as well as careful consideration given to the effectiveness of the FCA’s existing policy of personal accountability, given effect through the Senior Managers Certification Regime (‘SMCR’). Market abuse, corporate criminal offence, failure to prevent, EU Market Abuse Regulation 2014, whistleblowers.