Exploring Corporate Governance Around the World

By Allison Garrett, Senior Vice President for Academic Affairs at Oklahoma Christian University

Wednesday, September 27, 2006

Options Crackdown in the UK

The UK's Financial Services Authority said yesterday that it will crack down on options scams. In particular, the newletter announcement noted concerns over spring loading (grant just prior to release of good news) and bullet dodging (delayed grant to take advantage of bad news). The announcement came in an article in the FSA's Market Watch newsletter.
Stock options issues of the type discussed in the U.S. press in recent months are subject to the UK's market abuse rules. According to a Times article, manipulation of the timing of grants constitutes prohibited dealing under the rules (Financial Servics and Markets Act s.118(2)). Use of non-public information to gain an advantage of sorts over normal market participants is unfair dealing and will lead to enforcement action in the UK.

There is no indication that the FSA is aware of particular companies engaging in the prohibited conduct described. Rather, the announcement is a warning to companies to avoid such behavior.

No comments: