عنوان

The regulation of fraud and manipulation in financial markets and its reform :

Number

TLets392920

Title Proper

The regulation of fraud and manipulation in financial markets and its reform :

General Material Designation

[Thesis]

First Statement of Responsibility

Avgouleas, Emilios.

Title Proper by Another Author

a UK-EC perspective.

Name of Publisher, Distributor, etc.

London School of Economics and Political Science (University of London)

Date of Publication, Distribution, etc.

1999

Dissertation or thesis details and type of degree

Ph.D.

Body granting the degree

London School of Economics and Political Science (University of London)

Text preceding or following the note

1999

Text of Note

In the modem economic environment, financial markets play a strategic role infacilitating efficient resource allocation and preserving desired levels of welfare forindividuals and states. Financial markets fulfil this role only if they are efficient andfree from abuse. Fraud and manipulation have often plagued the proper operation offinancial markets and created serious economic problems. They take the form ofdissemination of misleading information through a variety of means includingmisrepresentations, artificial transactions and misleading trades. These practicesharm the integrity of financial markets and abuse their price formation mechanism.Thus, their effective deterrence and punishment is a matter of serious concern for botheconomic and moral reasons. The thesis examines three aspects of the relevantoffences: the definition of financial market fraud and manipulation; the rationales oftheir prohibition; the effectiveness of their legal and regulatory treatment in the UK interms of enforcement and deterrence. It also attempts to answer two crucialquestions: how the present regime in the UK could be reformed? How could thesuggested reform acquire an EC dimension?In classifying the various forms of financial market fraud and manipulation thethesis argues that the legal separation of manipulation from fraud is meaningless.Trading practices, which are commonly perceived as forms of market manipulation,but do not present the characteristics of fraud in a broad sense, should be de-regulated.Furthermore, the thesis provides an analysis of the relevant legal and regulatoryframework in the UK and the EC. It also explores aspects of the academic debate inthe US regarding the function and benefits of civil remedies in securities fraud casesand highlights relevant US case law. It notes that outside the context of public offerand/or listing of securities there is very limited scope in the UK for the exercise ofcivil remedies by injured investors on the incidence of financial market fraud andmanipulation. On the other hand, extensive reliance on criminal law sanctions for thedeterrence and punishment of relevant abuses has led to investor under-compensationand lengthy criminal trials that have produced very inconclusive results. Yet, theFinancial Services and Markets Bill 1999 addresses these issues only partially.For this reason, the thesis proposes the introduction in the UK of a right ofaction that could be exercised by aftermarket traders in the case of financial marketfraud and manipulation. The statutory enactment of a duty of care in thedissemination of market information owed by persons with material interests inrelevant financial assets could provide the legal basis for the exercise of such a rightof action. Also, the statutory or judicial endorsement of the fraud-on-the-markettheory could greatly facilitate civil actions for market fraud. In this way the proposedremedy would improve the effectiveness of the market abuse regime in the UK, asprivate enforcement actions would augment regulatory initiatives. It would alsoenable injured investors to obtain fair compensation for their losses. Finally, anargument is made for an EC market integrity directive that would harmonise nationalrules of conduct and incorporate a similar duty of care in the dissemination of marketinformation. This could be used as a means to create directly or indirectly a civilliability regime in the legal orders of most Member States.

Avgouleas, Emilios.

London School of Economics and Political Science (University of London)

Electronic name

p

[Thesis]

276903

a

Y