FCA warns traders to avoid potential market abuse

The FCA has released a warning to traders to avoid potential market abuse. We take a look at what has happened in the markets to prompt this.

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Road sign warning of a risk ahead

Image source: Getty Images.

The FCA has made a series of statements warning traders about involving themselves in potential market abuse. There are a lot of ongoing questions about what is happening in the markets right now. We’re here to explain the current situation and the FCA’s warnings.

What is the FCA?

The Financial Conduct Authority (FCA) is the UK’s main financial regulator.

Inflation Is Coming

Inflation is out of control, and people are running scared. But right now there’s one thing we believe Investors should avoid doing at all costs… and that’s doing nothing. That’s why we’ve put together a special report that uncovers 3 of our top UK and US share ideas to try and best hedge against inflation… and better still, we’re giving it away completely FREE today!

Click here to claim your copy now!

Its role is to monitor the conduct of financial markets, particularly relating to products and services provided to customers. So, preventing market abuse is a top priority.

The FCA is a limited company, not a government department, and their key responsibilities include:

  • Making sure markets function properly
  • Supervising how financial service firms behave
  • Ensuring a certain degree of protection for consumers
  • Promoting effective competition in the market

What has the FCA said about market abuse?

Because of the volatility and what’s happening to GameStop (GME) and other shares, the FCA has warned that its closely monitoring the situation.

Events in America are having a bit of a ripple effect on UK trading.

As a result, the FCA is warning that:

  1. Traders need to be aware of the risks when trading in a highly volatile market.
  2. Firms and individuals should make sure they’re abiding by all of the market abuse and short selling regulations for the market they’re trading in.

It wouldn’t be surprising if the FCA comes out with more information when they have a better understanding of the unfolding situation.

Why has the FCA made these warnings?

There’s a lot of activity at the moment around a handful of stocks.

The GameStop short squeeze is attracting a lot of interest. Until the dust completely settles, regulators won’t have a chance to really investigate whether everything happening has been above board.

So the FCA has come out pre-emptively to try and look out for investors. It’s a possibility that during this recent trading, there has been some market manipulation.

It’s important for investors to make sure that they’re familiar with all the necessary rules that might affect them.

When did the FCA make these warnings?

The watchdog released its warnings about potential market abuse and high-risk trading on Friday 29 January.

Because this is an evolving situation, and the potential impact on the UK is not yet known, the FCA has released these warnings immediately.

No one yet knows exactly how everything is going to unfold and so the FCA is playing its part in making sure investors are aware that its monitoring things. Regulators in America have released similar statements about the situation.

Everything is moving extremely quickly at the moment, and it will likely be some time before regulators have an opportunity to really get to the bottom of these latest trading events.

Takeaway

Regulators like the FCA are taking steps to make sure the public know that they’re watching the current markets.

Although the situation seems quite manic, things will calm down. It’s important that anyone involved in trading takes steps to make sure they understand the current risks and avoid any potential market abuse.

More on Personal Finance

Note paper with question mark on orange background
Personal Finance

Should you invest your ISA in a model portfolio?

Which model ISA portfolios offer both high performance and low fees? Hargreaves Lansdown, Interactive Investor and AJ Bell go under…

Read more »

Economic Uncertainty Ahead Sign With Stormy Background
Personal Finance

Is it time to exit emerging markets investments?

Investors may well be sitting on losses from emerging markets funds. Is it worth keeping the faith for a sustained…

Read more »

Personal Finance

Share trading? Three shares with turnaround potential

Share trading has been difficult in 2022, but which companies have turnaround potential? Jo Groves takes a closer look at…

Read more »

Man using credit card and smartphone for purchasing goods online.
Personal Finance

Revealed! Why Gen Z may be the savviest generation when it comes to credit cards

New research reveals that Gen Z may be the most astute when it comes to credit cards. But why? And…

Read more »

Environmental technology concept.
Personal Finance

The 10 best-performing sectors for ISA investors

The best-performing sectors over the past year invested in real assets such as infrastructure, but is this trend set to…

Read more »

Road sign warning of a risk ahead
Personal Finance

Recession risk ‘on the rise’: is it time for investors to worry?

A major global bank has suggested the risk of a recession in the UK is 'on the rise'. So, should…

Read more »

pensive bearded business man sitting on chair looking out of the window
Personal Finance

1 in 4 cutting back on investments amid cost of living crisis

New research shows one in four investors have cut back on their investing contributions to cope with the rising cost…

Read more »

Image of person checking their shares portfolio on mobile phone and computer
Personal Finance

The 10 most popular stocks among UK investors so far this year

As the new tax year kicks off, here's a look at some of the most popular stocks among UK investors…

Read more »