The FSA is investigating what appears to have been a “trash and cash” operation relating to HBOS shares: this is where someone (perhaps a bank trader or a hedge fund) for a fee borrows shares, say in HBOS, promising to return them on a fixed date; sells them, say at £1 each; then does something, for instance going into pubs in the City telling everyone that HBOS is about to do a Northern Rock, to mislead others into selling their shares; then finally, when the price goes down, buying them back, say at 90 pence a piece.

It’s market abuse, by means of a manipulative device; or you can simply call it market manipulation. Here’s a good guide to the civil regulatory regime and related criminal provisions, by Morgan Lewis solicitors.

And here’s section 397(3) of the Financial Services and Markets Act 2000, which makes this kind of market manipulation an offence. You’ll see from subsection (8) that the maximum sentence is seven years imprisonment or an unlimited fine.

2008-03-20T18:04:00+00:00Tags: , , |