Britain to bolster post-Brexit criminal sanctions to keep markets clean

© Reuters. FILE PHOTO: Signage for the Financial Conduct Authority (FCA), the Britain's financial regulatory body, is seen at their head offices in London, Britain March 10, 2022. REUTERS/Toby Melville

By Huw Jones

LONDON (Reuters) -Rules inherited from the European Union that crack down on abuses in financial markets need updating to ensure regulators can tackle breaches, Britain's finance ministry and Financial Conduct Authority (FCA) said on Friday.

The criminal market-abuse regime, which sets out sanctions for insider dealing and manipulative behaviour in markets, was reviewed by the ministry and the FCA following Britain's departure from the EU in 2020.

"The government committed to reviewing the criminal regime to ensure that the FCA can take action against market abuse in a way that is commensurate to the seriousness and market impact of the abusive behaviour," the ministry and FCA said in a joint statement.

"The review has identified a number of areas where the government believes it would be appropriate to update the criminal regime."

Changes to criminal sanctions will form part of a wider post-Brexit examination of regulation, known as the Future Regulatory Framework (FRF) review.

"As part of the FRF programme, the government intends to repeal the Market Abuse Regulation, the civil market abuse regime, and replace it with UK-specific legislation. We will set out a timetable for this in due course," the statement said.

Simon Morris, a financial services partner at law firm CMS, said most market abuses are civil offences, and the criminal regime should be broadened to include more of the serious offences.

"The EU has criminalised most serious market abuse while the UK lags with a 30-year-old regime no longer fit for purpose," Morris said.

"Second, more surveillance resources for the FCA and some joined-up thinking with the fraud prosecutors will yield 10 times the results of tinkering with the current rules."