Chapter 3 - Misleading Statements and Impressions FSA 2012

Question 1

Explain - • Misleading statements (FSA 2012, s.89)

Answer 1

• Covers deliberate deceit and recklessness
• Covers things said and things not said (concealed)
• Intention: cause investor to alter his position for the worse, i.e. to enter (or not) investment agreement or to exercise (or not) investor rights

Question 2

Explain - • Misleading impressions (FSA 2012, s.90)

Answer 2

• Act/conduct (e.g. starting a false rumour) intended to:

• Give a false impression about:

• Market in investments; or
• Price/value of investments

Question 3

Explain - • Criminal penalty

Answer 3

• Summary: six months jail/£5,000 fine

- Indictment: seven years jail/unlimited fine

Question 4

Explain - Misleading Statements etc. in Relation to Benchmarks

• FSA 2012 introduced new criminal offences following the LIBOR-fixing scandal

Answer 4

• FSA 2012 repealed the former provisions in FSMA 2000, s.397, and:

• FSA 2012, s.89, (misleading statements) re-enacts FSMA 2000, s.397(1)
• FSA 2012, s.90, (misleading impressions) re-enacts FSMA 2000, s.397(3)
• FSA 2012, s.91: creates two new offences relating to the setting of a benchmark (such as LIBOR) (same penalties apply)

Benchmarks covered:

• wef 1.4.2013 – LIBOR
• wef 1.4.2015 – SONIA (Sterling Overnight Index Average)
• RONIA (Repurchase Overnight Index Average)
• ICE Swap Rate (was ISDAFIX before 2015)
• WM/Reuters 4pm London Closing Spot Rate
• LBMA Gold Price (was London Gold Fixing before 2015) - LBMA Silver Price
• ICE Brent Index

Question 5

Misleading Statements etc. in Relation to Benchmarks

Explain - New offence No. 1 (FSA 2012, s.91(1)):

Answer 5

A makes a false or misleading statement to B, and:

• A makes the statement as part of arrangements for setting a benchmark;
• A intends that B should use the statement for the purpose of setting the benchmark; and
• A knows that the statement is false or misleading (or is reckless about it)

Question 6

Misleading Statements etc. in Relation to Benchmarks

Explain - New offence No. 2 (FSA 2012, s.91(2)):

Answer 6

Act/conduct by C which creates a false/misleading impression about:

• Price/value of any investment; or
• Interest rate appropriate to any transaction; and
• C intends to create the impression and knows that it is false/misleading (or is reckless about it); and
• The impression may affect (and C knows that it may affect) the setting of a benchmark