Your feedback is essential to help us improve - click here to take our 3 minute survey.

FCA warns traders to avoid potential market abuse

FCA warns traders to avoid potential market abuse
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.

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.

Rated 5 stars out of 5 by The Motley Fool UK

Trade UK shares for just £2.95 and US shares for just $3.95 — with no platform fee!

The FinecoBank* Multi-Currency Trading Account offers UK investors highly competitive share-dealing rates across 26 global markets. Open your account using promo code TRD500-ML and during your first 3 months you can trade without incurring commission charges – up to a total commission amount of £500. (Terms and conditions apply.)

*Affiliate Partner. Important information and risk disclaimer: The value of shares and any income produced can fall as well as rise, and you may get back less than you invest. Exchange rate fluctuations can reduce the sterling value of any overseas holdings.

Was this article helpful?
YesNo

Some offers on The Motley Fool UK site are from our partners — it’s how we make money and keep this site going. But does that impact our ratings? Nope. Our commitment is to you. If a product isn’t any good, our rating will reflect that, or we won’t list it at all. Also, while we aim to feature the best products available, we do not review every product on the market. Learn more here. The statements above are The Motley Fool’s alone and have not been provided or endorsed by bank advertisers. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. The Motley Fool UK has recommended Barclays, Hargreaves Lansdown, HSBC Holdings, Lloyds Banking Group, Mastercard, and Tesco.