UK's Financial Services Authority Confirms Investigation Into "Shell"

The FSA today confirms that it is formally investigating various issues surrounding recent announcements made by The "Shell" Transport and Trading Company, PLC. The FSA has been conducting enquiries into this matter for some weeks now, including gathering and analysing documentary evidence, and has been in close contact with the relevant overseas regulators throughout.

The company has been notified of the investigation and in accordance with standard FSA practice, no further statements will be made until this work reaches a conclusion.

Background

1. What is the FSA's locus in relation to listed companies? We enforce the Listing Rules, the Market Abuse regime and we can prosecute for the criminal offences of misleading statements and practices.

   UKLA Listing Rules – listed companies have to adhere to the requirements of the listing rules and a breach of these can result in the FSA taking action against the issuer and directors knowingly concerned in any breach.

   Code of Market Conduct (Market Abuse) – The Code covers dealings in securities traded on the UK’s markets. Involvement in any of the following activities may lead to disciplinary action by the FSA:

   • Misuse of information
     This involves misusing information which is relevant, not generally available and normally disclosed to the market.
   • Creating a false or misleading impression
     This involves making information available that is likely to give a false or misleading impression about the supply or demand, or price or value of an investment.
   • Distorting the market
     This involves interference with the normal process of share prices moving up and down in accordance with supply and demand. Distortion is improper conduct which manipulates the marketplace to the detriment of investors, for example purposely pushing up (or down) the price of shares to a distorted level.

   The FSA has the power to issue a private warning, public censure and unlimited fine on companies and their directors for breaches of the Listing Rules. For breaches of the Code of Market Conduct the FSA has the power to publicly censure or impose an unlimited fine on anyone, whether they are authorised or not, who engages in Market Abuse.

   The FSA can also take action in the following circumstances:

   S397 of FSMA – Misleading statements and practices

   This section of the Act makes it a criminal offence to engage in the following activities:

   (a) making a statement, promise or forecast which he knows to be misleading, false or deceptive;

   (b) dishonestly concealing any material facts whether in connection with a statement, promise or forecast made by him or otherwise; or

   (c) recklessly makes (dishonestly or otherwise) a statement, promise or forecast which is misleading, false or deceptive.

   Individuals found guilty of an offence under this section of the Act can face imprisonment for a term not exceeding seven years or a fine, or both.

2. 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.
3. The FSA aims to maintain efficient, orderly and clean financial markets and help retail consumers achieve a fair deal.