[…] [w]e intend to be bolder and more resolute about proceeding with market abuse and insider dealing cases so that we can actually bring about a change in the culture of the City […] ( Cole, 2008 ).
It is not for us to say whether any particular agency, along with the offences created to support its regulatory activities, are unnecessary. However, it is important to point out that the offences created to support the activities of regulatory agencies are often rarely used […] ( Law Commission, 2010, para. 1.25 ).
It is widely acknowledged that the aftermath of the global financial crisis – termed by former Prime Minister Gordon Brown in 2010 as the “first crisis of globalisation” ( Brown, 2010 ) – is set to put in place a new regulatory landscape1. In furtherance of this, new “regulatory conversations” are occurring both at national level within many individual nation states – both within the much troubled Eurozone and outwith; and also beyond this on Pan-European and international platforms. Much of this “spotlight” is on banking specifically within financial sector activity. This is so on account of continuing concerns about regulating so-called systemically important financial institutions (SIFIs)2 – where ongoing anxiety is being tracked by a number of exposures of impropriety3. More generally, and for a long time into the future, the crisis is likely to be associated with its systematic exposure of “unethical” behaviour ( O'Brien, 2012, pp. 178-179 ). Widely perceived as the failure of light-touch regulation and risk assessment ( Tomasic, 2011, p. 7 )4, for some the financial crisis is also likely to mark a turning point for responding to “financial crime” ( Tomasic, 2011, p. 7 ). This is so on account of exposure of conduct occurring during the crisis which is being regarded as potentially criminal behaviour, and which will ensure that the crisis is also likely to carry longstanding associations with the revelation of “massive financial fraud” ( Tomasic, 2011, p. 7 ). The latter suggestion forms a central plank for the hypothesis of the “haphazard pursuit of financial crime” ( Tomasic, 2011, p. 7 ).
This paper explores some domestic dimensions of the hypothesis of the “haphazard pursuit of financial crime”. This was proposed by Tomasic (2011, p. 8) as a lament on the lack of development of “criminal sanctions applicable to corporate financial misconduct”, and the concomitant under-utilisation of such sanctions in the context of financial failure. For this paper this construct has been appropriated to consider the pursuit of financial crime by the UK regulator put in place in 2000, the Financial Services Authority (hereafter referenced as the FSA, or the Authority). In acknowledging that the financial crisis has already revealed a considerable amount of financial crime ( Tomasic, 2011, pp. 7-8 ), and that such exposures are likely to continue for a time yet, it considers the hypothesis of “haphazard pursuit of financial crime” as one for exploring more generally criminal enforcement work carried out by the Authority. The FSA is of course being disbanded on account of changes introduced in the Financial Services Act 2012, and its replacement with the Financial Conduct Authority (FCA) is imminent on account of the “twin peaks” regime introduced by the 2012 Act5. The article is in any case most interested in the FSA's financial crime enforcement activities, flowing from its statutory remit as the body which until the financial crisis enjoyed jurisdiction over “virtually everything financial in the UK” ( Omoyele, 2006, p. 194 ). This requires paying attention to FSA enforcement beyond its responses to activity directly and indeed causally related to the crisis. In taking these more specific and also more generalised perspectives on the crisis together, the article seeks to cast light on the scope of the challenges being faced by the incoming FCA in respect of criminal enforcement in the post-financial crisis regulatory environment.
Centrally the article explores key dimensions of the FSA's functions as a criminal prosecutor, and key characteristics of its policy formation relating to this, and its experiences as such. In taking a lead from outgoing Chief Executive Hector Sants' explanations of the scope of the FSA's criminal prosecutorial functions, the role actually played by the FSA in relation to financial crime needs to be discerned from what is actually possible to bring within the rubric of financial crime. From the types of financial crime potentially of interest for the FSA, the article looks specifically at financial market misconduct offences. This means that this application of Tomasic's hypothesis is much narrower than Tomasic's (2011, p. 8) own association of financial crime with “criminal sanctions applicable to corporate financial misconduct”. Here it is suggested that analysing the FSA's approach to offences commonly found grouped under the rubric of “market abuse” through the lens of the “haphazard pursuit of financial crime” is an extremely valuable way of understanding a number of key themes which are apparent in Tomasic's reflections on the under-utilisation of criminal enforcement. These include centrally the nature and function of regulators, and the “external” forces which influence their policies and actions, and especially the pressure to be effectual and yet not “heavy [handed] and intrusive” ( Tomasic, 2011, p. 8 ). This also embraces the nature and significance of criminal enforcement within English legal culture, and the intellectual and pragmatic difficulties its direction towards financial crime has traditionally encountered. Many of these considerations are to be found captured in Tomasic's proposition that “White collar […] crimes have long been part of markets and are among the most difficult crimes for the legal system to deal with, let alone control” ( Tomasic, 2011, p. 7 ).
Straddling these key considerations, this discussion considers the significance that has been attached by the FSA to criminal enforcement as part of its key ethos and philosophy of “credible deterrence”. These are interesting issues and ones that are worthwhile exploring in the light of long-standing concerns about the pursuit of responding to financial crime emanating from scholars and practitioners alike, and ones which – as will be explained – are very much to the fore as part of the regulatory aftermath of the global financial crisis. There are three further considerations discussed in this article which are likely to influence responses to financial crime at this crucial juncture for future regulation of UK financial markets. The first is that, as previously noted, the FSA itself is due to be disbanded and its functions separated into two different regulatory bodies, with the aforementioned FCA (rather than the PRA6) set to undertake FSA functions relating to financial crime7. From this there are important questions concerning how the attention which is currently being paid to financial crime by the FSA could forecast how the FCA approach might be fashioned from its proposed remit. Very generally, key policy literature is giving some signpostings of the FCA's envisioned functions and approach, and from this, this discussion considers the challenges which might by faced by the FCA. This includes reference to the considerable pressure currently being placed on government departments to move away from utilising criminal enforcement.
This particular development is explored using the Law Commission's (2010) . A number of key recommendations have already been implemented in the
The exposures which will be responsible for the associations of the global financial crisis with “massive financial fraud” actually started to happen as early as 2008, in the USA, in the case of investment giant Bear Sterns. At this time it was suggested that the prosecution of two key executives for their role in the securitization of sub-prime mortgage assets was...