Market manipulation is an ever-evolving area. The changing nature and increased globalisation of markets mean that the scope for manipulation, and the possibility of being accused of it, are also subject to variation.
Successfully avoiding, or defending against, regulatory action in this area requires an in-depth understanding of trading and market mechanics. It also requires experience facing off against the regulatory agencies that oversee the markets and impose criminal and civil penalties.
Rahman Ravelli specialises in guiding traders, investors and financial firms through the vast amounts of market manipulation regulation in two of the world’s largest and most active markets: the United States and the United Kingdom.
Our cross-border team has vast experience of representing clients facing scrutiny or legal action from these countries’ primary market regulators, including:
We also routinely advise clients involved in internal investigations related to potential market-related misconduct.
Our aggressive approach to market manipulation matters starts with a deep dive into the conduct at issue to fully understand the trading strategies that may lay behind it.
We then work with our clients and our network of trading experts to craft a defence narrative explaining why no laws or regulations were violated.
Market manipulation refers to practices that artificially distort the price, volume, or orderly functioning of financial markets. Under the UK Market Abuse Regulation (UK MAR), as retained following Brexit, market manipulation includes: transactions or orders that give false or misleading signals as to the supply, demand, or price of a financial instrument; transactions that secure an artificial price level; and transactions involving fictitious devices or deception. Spoofing, layering, wash trading, and the dissemination of false or misleading information are all common forms of market manipulation.
Market manipulation is primarily governed by the UK Market Abuse Regulation (UK MAR) on the civil/regulatory side, enforced by the FCA. Criminal market manipulation is addressed by section 89-91 of the Financial Services Act 2012, which creates offences of making false or misleading statements, creating false or misleading impressions, and benchmark manipulation. The FCA can pursue both regulatory action (resulting in substantial fines and prohibition) and criminal prosecution for the most serious cases. LIBOR manipulation prosecutions were brought under these criminal provisions.
The LIBOR (London Interbank Offered Rate) scandal involved the manipulation of benchmark interest rates by traders and other personnel at major global banks from approximately 2005 to 2012. The manipulation affected trillions of dollars in financial contracts globally. In the UK, the FCA and Serious Fraud Office pursued extensive criminal and regulatory proceedings, resulting in numerous individual convictions and multibillion-pound institutional fines. Related civil litigation continues, with claimants seeking compensation for losses resulting from artificially distorted rates.
Spoofing involves placing large orders in a financial market with the intention of cancelling them before execution, in order to create a misleading impression of supply or demand and thereby influence prices in a direction that benefits the spoofer's existing positions. UK and US regulators have pursued spoofing cases aggressively in recent years, particularly in equities, futures, and foreign exchange markets. Both the FCA and the US CFTC and DOJ have cooperated on cross-border spoofing investigations.
Yes. Individuals can face criminal prosecution for market manipulation under sections 89-91 of the Financial Services Act 2012, with a maximum sentence of seven years' imprisonment. Insider dealing is separately addressed by the Criminal Justice Act 1993, carrying a maximum of seven years. The FCA has also pursued individuals for regulatory market abuse under UK MAR, which can result in substantial financial penalties and prohibition from regulated activities.
Insider dealing is a distinct but related market abuse offence. It involves dealing in securities while in possession of inside information — that is, information that is precise, not publicly available, and which, if made public, would likely have a significant effect on the price of the securities. Insider dealing is a criminal offence under the Criminal Justice Act 1993 and is also a civil market abuse offence under UK MAR. It differs from market manipulation in that it involves the misuse of information rather than the artificial distortion of market activity.
You should seek specialist legal advice before responding to any FCA information request. The FCA has powers to compel the production of documents and require individuals to attend compelled interviews under section 165 and section 172 of the Financial Services and Markets Act 2000. While there is a duty to cooperate with the FCA's investigation, responses must be carefully prepared, legally privileged material must be identified and protected, and individuals facing compelled interview must receive separate legal advice about their own position.
Market manipulation investigations are technically demanding, involving complex analysis of trading data and market microstructure. They frequently involve simultaneous FCA regulatory proceedings and criminal investigations, and often have an international dimension with involvement of overseas regulators such as the SEC and CFTC. The consequences of an inadequate response — including providing inconsistent accounts to different authorities — can be severe. Specialist solicitors in this area combine deep knowledge of financial markets regulation with experience of complex criminal and regulatory proceedings.
Spoofing and Market Manipulation 2020 Year in Review
Rahman Ravelli’s “2020 Year in Review. Spoofing and Market Manipulation’’ examines market abuse in the United Kingdom, United States and European Union. Written by Rahman Ravelli’s specialists, it gives a comprehensive overview and detailed analysis of the year’s notable issues and significant cases.
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A Primer On - Market Manipulation Regulations in the U.S. and U.K.
WHAT IS MARKET MANIPULATION? Besides facilitating the transfer of stocks, currencies, futures, and other financial instruments between buyers and sellers, a basic function of financial markets is to allow participants to communicate information to one another about their subjective view of a particular instrument’s price.
Chapter.1 - What is Market Manipulation?
Chapter.2 - Market Manipulation under Federal US Law.
Chapter.3 - Market Manipulation in the UK.
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