Abuse Enforcement Research Articles

Order and trade data analysis in recent spoofing investigations

This paper examines recent enforcement action by the UK Financial Conduct Authority (FCA) in relation to spoofing and, in particular, the FCA's use of trading data analysis in support of its findings. Data analysis has become an increasingly important part of recent FCA market abuse enforcement actions, particularly with respect to spoofing investigations. Where other evidence of manipulative intent is absent, the FCA may seek to infer such intent from order and trading activity where there appears to be no legitimate explanation for it. But — as this paper explains — any such inference must be based on sound analysis: there must be clarity around the sample on which an observed pattern is based as well as any sampled trading which does not appear to fit the observed pattern and which might therefore point away from manipulative intent.

Deterrence effects of antifraud and abuse enforcement in health care

Estimates of the benefits of antifraud enforcement in health care typically focus on direct monetary damages. Deterrence effects are acknowledged but unquantified. We evaluate the impact of a Department of Justice investigation of hospitals accused of billing Medicare for unnecessary implantable cardiac defibrillator (ICD) procedures on their use. Using 100 % inpatient and outpatient procedure data from Florida, we estimate that the investigation caused a 22 % decline in ICD implantations. The present value of savings nationally over a 10 year period is $2.7 billion, nearly 10 times larger than the $280 million in settlements the Department of Justice recovered from hospitals. The investigation had a large and long-lasting effect on physician behavior, indicating the utility of antifraud enforcement as a tool for reducing wasteful medical care.

Deterrence Effects of Antifraud and Abuse Enforcement in Health Care

Estimates of the benefits of antifraud enforcement in health care typically focus on direct monetary damages. Deterrence effects are acknowledged but unquantified. We evaluate the impact of a Department of Justice investigation of hospitals accused of billing Medicare for unnecessary implantable cardiac defibrillator (ICD) procedures on their use. Using 100% inpatient and outpatient procedure data from Florida, we estimate that the investigation caused a 22% decline in unnecessary ICD implantations. The present value of savings nationally over a 10 year period is $2.7 billion, nearly 10 times larger than the $280 million in settlements the Department of Justice recovered from hospitals. The investigation had a large and long-lasting effect on physician behavior, indicating the utility of antifraud enforcement as a tool for reducing wasteful medical care. Institutional subscribers to the NBER working paper series, and residents of developing countries may download this paper without additional charge at www.nber.org.

Patents, Technical Standards and Standards-Setting Organizations: A Survey of the Empirical, Legal and Economics Literature

Despite their potential efficiency benefits, voluntary consensus standards have over the past decade become the subject of significant private litigation, regulatory enforcement and policy debate. Much of the controversy centers on the perceived proliferation of patents covering standardized technologies, potentially abusive enforcement of such patents against manufacturers and users of standardized products, and the terms on which patent holders may be required to license the use of those patents to others. This chapter offers a brief overview of the legal and economic literature concerning interoperability standards and standards-setting organizations, with a focus on empirical studies and contemporary patent and patent licensing concerns.

The Regulation of Market Manipulation in Australia: A Historical Comparative Perspective

Notably, in Australia, market abuse practices like market manipulation and other market misconduct practices are expressly prohibited under the Corporations Act as amended by the Financial Services Reform Act. In the light of this, and for the purposes of this article, a brief historical analysis of the market manipulation prohibition will be presented first. Secondly, the available penalties and remedies for market manipulation are discussed. Thereafter, possible recommendations and significant Australian anti-market abuse enforcement approaches that may be utilised in South Africa are briefly stated. Lastly, concluding remarks are provided.

Overview of the Enforcement of the Market Abuse Prohibition in the United Kingdom

Like several other countries, the United Kingdom has a regulatory and enforcement framework in place to combat insider trading, as well as other forms of market manipulation practices. Put differently, a robust and relatively effective anti-market abuse regulatory and enforcement framework is in place in the United Kingdom. Consequently, and where appropriate, the relevant enforcement approaches of the United Kingdom’s market abuse regime will be compared with similar approaches that are provided for in the South African anti-market abuse framework. This is primarily done to, inter alia, isolate possible and applicable anti-market abuse enforcement approaches from the United Kingdom’s market abuse regime that could be adopted and/or integrated in the South African anti-market abuse enforcement framework. In relation to this, the role of the Financial Services Authority will be analysed first. Secondly, a similar analysis will be carried out in respect of the courts. Thirdly, the role of the self-regulatory organisations will be discussed. Lastly, final concluding remarks will be provided. DOI: 10.5901/mjss.2014.v5n20p272

An Analysis of the Establishment and Enforcement of Anti-Market Abuse Preventative Measures in the United Kingdom

The United Kingdom has to date successfully developed and/or adopted various measures aimed at discouraging market abuse practices in its financial markets. Consequently, the preventative measures employed in the United Kingdom will be investigated and, where necessary, contrasted with similar anti-market abuse measures in South Africa. Accordingly, only relevant United Kingdom market abuse provisions and cases will be discussed and contrasted with similar provisions and cases in South Africa for the purposes of identifying market abuse preventative methods that could possibly be incorporated in the South African anti-market abuse enforcement framework. Given this background, the co-operation between the Financial Services Authority, the Treasury, the Department of Trade and Industry and the courts will be examined first. Secondly, the co-operation between the Financial Services Authority and the local self-regulatory organisations will be discussed. Thirdly, the co-operation between the Financial Services Authority and similar international regulatory bodies will be scrutinised. Fourthly, other preventative measures that were adopted in the United Kingdom will be analysed. Lastly, possible recommendations and conclusions will be given. DOI: 10.5901/mjss.2014.v5n20p529

The Inherent Challenges in the South African Anti-Market Abuse Enforcement Framework in Relation to Selected Market Abuse Practices that Occurred During the Global Financial Crisis

The article discusses selected market abuse activities that manifested in several financial markets during the recent global financial crisis. In relation to this, market abuse activities such as front running and quote stuffing, dark pools and flash orders, hedge funds insider trading and high yield securities investment fraud, high frequency trading, credit default swaps and short selling will be briefly analysed. This is done to investigate whether the current South African anti-market abuse enforcement framework is robust enough to effectively combat these activities. This is further aimed at exposing certain challenges embedded in the South African anti-market abuse enforcement framework in relation to the prevention and combating of the aforementioned practices in the financial markets in South Africa. To this end, the article seeks to explore these challenges by, first, examining the adequacy of the South African anti-market abuse enforcement framework with regard to the combating of front running and quote stuffing. Secondly, the adequacy of the South African anti-market abuse enforcement framework with regard to the curbing of dark pools and flash orders will be discussed. Thirdly, the adequacy of the aforesaid enforcement framework will be examined in relation to the combating of hedge funds insider trading and high yield securities investment fraud. Fourthly, a similar examination will be done in respect of high frequency trading. Fifthly, the adequacy of the South African anti-market abuse enforcement framework with regard to the curbing of credit default swaps will be discussed. Lastly, a similar discussion regarding short selling will be undertaken. DOI: 10.5901/mjss.2014.v5n8p60

A Comparative Overview of the State Prohibition on Market Abuse in the United States of America*

It is important to note that market abuse is outlawed both at a federal and state level in the United States of America (the US). In relation to this, it is worth noting that the state prohibition on market abuse has relatively and immensely contributed to the combating of market abuse activities in the US capital and financial markets to date. Consequently, it is on this basis that this article provides a brief overview analysis of the enforcement of the market abuse prohibition, firstly in California state. Secondly, a similar analysis will be done focusing on Delaware state. Lastly, the enforcement of the market abuse ban in Washington state will be undertaken. The aforementioned states are selected not only because of their unique and relatively consistent anti-market abuse enforcement approaches but also because of the potential enforcement lessons that could be adopted from such approaches, especially in South Africa. Thereafter and where appropriate, relevant provisions and cases from the selected US states will be contrasted with similar provisions and cases in South Africa in order to identify and recommend, where necessary, possible anti-market abuse enforcement approaches that could be incorporated in the South African anti-market abuse regulatory and enforcement framework. DOI: 10.5901/mjss.2014.v5n7p54

Aspects of the Establishment and Enforcement of Anti-Market Abuse Preventative Measures in the United States of America

The United States of America (the US) has to date successfully developed and adopted several distinct enforcement approaches and preventative measures to combat market abuse activities in all its capital and financial markets. For instance, apart from relying on civil, criminal and administrative penalties, the US anti-market abuse enforcement framework also employs a co-ordinated (joint) enforcement effort between the courts, self-regulatory organisations and the United States Securities and Exchange Commission (the SEC) at a federal level. Furthermore, other preventative measures such as private actions, public censure, bounty rewards and whistle-blower immunity are utilised to discourage and curb market abuse activities in the US. It is on this basis that this article will examine whether the integration of some of these US’s anti-market abuse enforcement approaches and preventative measures will improve the enforcement of the market abuse prohibition in South Africa. To this end, selected preventative measures and enforcement approaches that are adopted in the US will be discussed and, where appropriate, contrasted with similar measures and/or enforcement methods in South Africa so as to identify and recommend possible enforcement approaches that could be incorporated in the South African anti-market enforcement framework. This is done by, first, discussing the co-operation between the SEC, the Department of Justice (the DOJ) and the courts. Secondly, the co-operation between the SEC and other selected self-regulatory organisations will be analysed. Lastly, the adoption and establishment of a good enforcement ethics culture in the US will be examined. DOI: 10.5901/mjss.2014.v5n7p253

An Analysis of the Market Abuse Prohibition Enforcement in the United States of America

The United States of America (the US) has developed one of the most progressive and effective anti-market abuse enforcement frameworks in recent years. For example, at a federal level, its anti-market abuse enforcement framework involves self-regulatory organisations as well as private actions that enhance compliance with the law and facilitate the levying of sanctions against offenders. Put differently, rigorous enforcement is the key component of the US’s market abuse regulation that makes it unique from similar regulation in other countries. Consequently, the US’s anti-market abuse enforcement approaches have influenced the regulation of market abuse in a number of countries, including South Africa. Given this background, the detection, prosecution and enforcement measures adopted in the US will be briefly discussed and, where applicable, contrasted with similar enforcement methods in South Africa in order to recommend possible anti-market abuse enforcement measures that could be employed to increase the curbing of market abuse activities in South Africa. This is done by, first, examining the role of the United States Securities and Exchange Commission (the SEC) in relation to the enforcement of the market abuse prohibition in the US. Secondly, the role of the Department of Justice and the courts in relation to the enforcement of the market abuse ban in the US will be analysed. Lastly, a similar analysis in respect of other selected self-regulatory organisations will be undertaken. DOI: 10.5901/mjss.2014.v5n7p188

The Gaps and Flaws in the Current South African Anti-Market Abuse Enforcement Framework in Relation to Selected Aspects of the Financial Markets

The objective of this article is to analyse and reveal that the enforcement of market abuse laws has been and still is, problematic in South Africa. In this regard, the article provides an overview analysis of the gaps and flaws in the current anti-market abuse enforcement framework in relation to some selected specific aspects of the financial markets in South Africa. This is primarily done to increase awareness on the part of the general public, policy makers and other relevant stakeholders and to innovate possible solutions to such flaws and challenges in order to enhance the enforcement of the market abuse ban in South Africa. Moreover, this is done to investigate whether the current South African anti-market abuse enforcement framework is robust enough to deal with some market abuse practices that manifested during the recent global financial crisis. In relation to this, the article seeks to explore this and other enforcement-related concerns by, first, taking a closer look at the adequacy of the South African anti-market abuse enforcement framework with regard to market transparency. Secondly, the adequacy of the South African anti-market abuse enforcement framework with regard to investor due diligence will be discussed. Thirdly, the adequacy of the aforementioned enforcement framework will be examined in relation to issuer transparency. Lastly, a similar examination regarding credit rating agencies will be undertaken. DOI: 10.5901/mjss.2014.v5n4p236

The FSA, “credible deterrence”, and criminal enforcement – a “haphazard pursuit”?

Purpose– Located within growing scholarly interest in linking the global financial crisis with revelations of financial crime, this piece utilises Roman Tomasic's suggestion that the financial crisis has marked something of a turning point in regulatory responses to financial crime worldwide. Tomasic attributes this to changing attitudes towards light-touch regulation and risk assessment, and the demand for existing agencies to be replaced with new tougher authorities. In the UK, this can be illustrated by the imminent replacement of the FSA with the Financial Conduct Authority (FCA). The paper aims to discuss these issues.Design/methodology/approach– Discussion of the FSA's financial crime fighting activity is an important forecast for the likely directional focus of the FCA in this regard. A focus only on “market abuse” enforcement within this arises on account of the effects for financial systems widely attributed to this activity, with threats to systemic stability being a hallmark of the 2007-2008 financial crisis. This methodology also encourages coherence in focus and management of sources within the article. Market abuse enforcement provides a lens for exploring the FSA's adoption of the philosophy and ethos of “credible deterrence”, and FCA commitment to retain it, and ultimately for applying the hypothesis of the “haphazard pursuit of financial crime” to pre-crisis criminal enforcement relating to financial crime undertaken by the FSA.Findings– The FSA and FCA appear acutely aware that the financial crisis has marked something of a turning point for the enforcement of financial crime, and for signalling changes in approach, for the reasons explored by Tomasic. Tomasic correctly identifies factors encouraging a range of undesirable practices pre-crisis, and ones signalling tougher and more sustained attention being paid to financial crime henceforth. It is noted that, pre-crisis, the FSA's pursuit of criminal enforcement of market abuse was conscious, comprehensively resourced, well publicised, and actually extensive.Originality/value– This exploration of the FSA's criminal enforcement of market abuse given the Authority's own perceptions that it was not, and could never be, a “mainstream” criminal prosecutor considers the likely lasting legacy of this determined pursuit, when domestic politics and pan-European policies suggested against this. This is likely to be enormously valuable as the FCA undertakes this task in a domestic arena which is markedly in contrast from this, and where European agendas are pushing in favour of criminal enforcement, with the “more Europe, or less” debate providing a further dimension of interest.

Professorss Letter in Support of Patent Reform Legislation

This open letter to Congress, signed by 61 professors who teach and write in the area of intellectual property law and policy, supports ongoing efforts to pass patent reform legislation. The letter explains how high litigation costs and a widespread lack of transparency in the patent system make abusive patent enforcement possible and, accordingly, makes six legislative recommendations that if enacted will help reduce the cost of patent litigation and expose abusive practices without degrading inventors’ ability to protect genuine, valuable innovations.

The effects of the fraud and abuse enforcement program under the National Health Insurance program in Korea

To examine the general deterrence effect of the Korean government's fraud and abuse enforcement program on medical clinics in the country. The effects were evaluated by analyzing the association between the fear of penalty from a potential onsite investigation and the costliness index (CI). Using a stratified proportional systematic sampling method, 800 out of the 15,443 clinics in Korea that had not had an onsite investigation before June 2007 were selected. Perceived deterrence was measured via face-to-face interviews with the chief doctor of each clinic; these were conducted in July and August 2007. CI was calculated by dividing observed costs by expected costs based on National Health Insurance Claims from January to October 2007. Clinics with a high fear of penalty had a significantly lower CI than did other clinics after adjusting for factors related to the provider's perception of onsite investigation, the provider's service experiences, and general characteristics such as provider's sex and age. Designing effective fraud and abuse control programs can improve the efficiency of providing services to patients.

Police organizational structure and child sexual abuse case attrition

PurposeThis paper aims to explore the effects of formal police organizational structure on child sexual abuse case attrition.Design/methodology/approachData from two surveys were merged for this analysis: a 1988 survey of child abuse enforcement in US police departments, and the 1987 Law Enforcement Management and Administrative Statistics (LEMAS) database produced by the Bureau of Justice Statistics. Based on the structure‐performance link that is rooted in structural contingency theory, this study examines the effects of both global and specific structural features on two case disposition ratios. Because structure is more easily malleable than other factors that may affect performance, such as environment and context, it is important to know whether certain structural arrangements produce more desirable outcomes than others.FindingsThe results indicate that the global structural variables included in this analysis play a small role in child sexual abuse case attrition. None of the variables included in the model influence the rate at which cases are designated as “founded”. The size and height of police agencies and the rate at which they designate cases as founded both influence their arrest rates for child sexual abuse cases.Research limitations/implicationsThe small sample size made it difficult to estimate the models. Future research should test the findings reported here using larger samples.Originality/valueTo the author's knowledge this is the first study to compare the effects of global and specific structures on police outputs.

Health Care Fraud and Abuse Laws

Health care fraud and abuse enforcement actions have significantly expanded in number and scope during the past several years. The Department of Health and Human Services Office of Inspector General named review of in-office pathology services a critical priority in its 2005 Work Plan. As providers of pathology and laboratory medicine services, pathologists need to be aware of the potential impact of these laws on their practices. To review the major statutes and regulations underlying most federal investigations and prosecutions of health care fraud, with a special emphasis on their relationships to pathology practice. The authors reviewed pertinent federal statutes, regulations, and other documents, along with relevant legal literature. The health care fraud and abuse laws are complicated and potentially impact pathology practice in unforeseen ways. The health care fraud and abuse laws are complex and often counterintuitive. The penalties for violation of these laws are severe. Because they may impact many areas of pathology and laboratory medicine practice, pathologists are advised to consult experienced legal counsel prior to embarking on potentially suspect health care arrangements.

Fighting for children.

Child abuse is a problem of national importance. Nationwide, billions of dollars are spent on the child welfare system, but child abuse rates remain high. At the federal level, new laws, such as the Child Abuse Prevention and Enforcement Act, the Foster Care Independence Act, and the Adoption and Safe Families Act, represent steps toward addressing the problem. However, increased efforts are needed to raise awareness of the problem of child abuse and to prevent it. Furthermore, more attention is needed to address the need for reform of the child welfare system and to involve the private sector in helping abused children.

Drug abuse and law enforcement.

problems are a major psychological reason for the worldwide spread of drug abuse, and the particular problems of the police persona have made lawenforcement officials ineffective in preventing that spread through drug al)use education. The polarization in our society, the so-called generation gap, has led to a kind of hardening of the confronting personas into rigid masks. The reciprocal projections that ensue reinforce each opponent’s conviction that his own beliefs afl(l opinions are correct and the other person’s are wrong, and neither really listens to the other. Such problems, as they relate to the personas of adolescents, parents, teachers, and treating personnel, and the sham associate(l with those masks, are the subject of a separate study.1 The reciprocal projections make the problem of drug control more difficult, because they make clear thinking impossible. Furthermore, in our enormous ignorance of many of the basic issues of (Irug abuse,