to offer a safe harbour status in market abuse enforce-
ment where there has been compliance with the
Code, though the FSA is still required to keep itself
informed about the way the Takeover Panel inter-
prets and administers the Code.
The FSA has given some examples of what could con-
stitute market abuse under the Code of Market Conduct
that it has published. These include:
■persons using Internet bulletin boards to post mis-
leading information; and
■financial journalists using inside knowledge to trade
in shares.
It appears that the FSA will be able to identify persons
hiding behind aliases on the bulletin boards. As we have
seen, because the FSA operates under the civil regime, it
will only have to prove ‘on a balance of probabilities’
that a market user behaved in a way that amounted to
market abuse.
Currently the UK market abuse system has a wider
scope than required by the European Union 2003 Market
Abuse Directive. The HM Treasury Consultation Paper
published in February 2008 was to review the scope of
the UK market abuse scheme. However, it was decided
to retain the current UK super equivalences until
31 December 2009 when the outcome of the European
review of the MAD is expected to be published.
The Sarbanes-Oxley Act 2002 and
UK fraud control
The above materials relate to particular types of abuses
covering companies having a UK Listing. However, it is
worth noting that increasingly today UK companies
have secondary listings on other financial markets and
may be subject to the controls put in place by other
countries. In particular, the US Sarbanes-Oxley Act of
2002 applies to UK companies with a secondary listing
in the USA, and the need to comply with it affects, to
some extent, the whole operation of the companies
concerned. The aim of the Act (SOX) is to boost the
confidence of investors in the US market and to deter
and punish corporate and accounting fraud and corrup-
tion and bring the wrongdoers to justice. At the same
time, it provides protection for employees who blow the
whistle on corporate fraud. It requires an increase in
financial disclosure, greater accountability of corporate
executives, the greater independence of the audit pro-
cess and punishment for improper conduct by senior
executives of companies.
Relevant UK measures are as follows:
■the Enterprise Act 2002, the anti-cartel provisions of
which are intended to build on those of the Com-
petition Act 1998 (see Chapter 7 );
■the Public Interest Disclosure Act 1998, which provides
protection for whistleblowing employees to encourage
them to speak out about perceived acts of business
fraud (see Chapter 16 );
■the Companies Act 2006, which places a legal obligation
on directors to volunteer information to auditors and
gives auditors increased rights to ask for company
information from employees (see Chapter 6 );
■the Proceeds of Crime Act 2002, whose main functions
include extending the scope of money-laundering
offences, introducing reporting requirements by pro-
fessionals and others in respect of money laundering
and the setting up of an Assets Recovery Agency to
relieve wrongdoers of their illegal funds. This is of real
concern to professionals, such as accountants and
solicitors, who fail to report suspicious transactions,
as where Fred, an accountant, fails to report to the
police the fact that one of his clients, who runs a
street-corner garage, has recently bought a private jet
and seems to fly quite often to Central and South
America. Prison sentences for such professionals are
available and will be used in appropriate cases.
In addition to creating money-laundering provisions,
the Proceeds of Crime Act 2002 also deals with confisca-
tion criminal proceedings. In Serious Fraud Office vLexi
Holdings plc (in Administration) and M(2008), the
appeal concerned a claim raised by a third party which
would reduce the amount of the restrained assets under
the restraint orders made under the 2002 Act. This is
presumably the first case to reach the Court of Appeal
Criminal Division since the Proceeds of Crime Act 2002
came into effect. In this case, a restraint order was made
prohibiting the Second Respondent, M, from removing,
disposing of, dealing with or diminishing the value of
any of his assets. There was provision in the order for up
to £250 per week to be spent on M’s ordinary living
expenses. The order was made on an application by the
Director of the Serious Fraud Office. The argument was
that the restraint order was made on 20 April 2006 on
the basis that a criminal investigation had been started
and the terms of s 40(2) were satisfied, but that no pro-
secution had been begun after two years. The respondent
submitted that a reasonable time had elapsed. Given the
‘very complex’ nature of the investigation, it was in noPart 3Business transactions