FSA seeks information on spinning from City firms
23/10/2002
The Financial Services Authority (FSA) has written to City firms asking whether spinning was an important feature of the UK market during the recent period of high activity in initial public offerings (IPOs). Spinning is the alleged practice of providing shares in popular IPOs to senior executives in the hope of attracting corporate finance business. The FSA is also requesting information on what processes UK regulated firms have in place to prevent spinning and is seeking views on a possible rule change which would explicitly outlaw certain types of conduct.
Howard Davies, executive chairman of the FSA, explains why the FSA is writing to firms:
"Recent disclosures in the US have thrown a spotlight on market practices surrounding IPOs. We want to be sure that firms operating in our markets meet the high standards implied by our regulatory principles."
The FSA considers that spinning could breach a variety of the principles that UK regulated financial firms are required to respect. These principles include the requirement to act with integrity, due skill, care and diligence; the need for proper standards of market conduct; the need to treat customers fairly and the need to manage conflicts of interest.
Notes for editors
The full text of the letter can be accessed here.
The principles referred to above are the principles 1, 2, 5, 6 and 8 of the Principles for Business that apply to all UK regulated financial firms. The FSA can apply the full range of disciplinary tools from private warnings to de-authorisation or prohibition to a breach of the principles, if it is considered necessary and proportionate.
The FSA regulates the financial services industry and has four objectives under the Financial Services and Markets Act 2000: maintaining market confidence; promoting public understanding of the financial system; securing the appropriate degree of protection of consumers; and fighting financial crime.
The FSA aims to maintain efficient, orderly and clean financial markets and help retail consumers achieve a fair deal.