In The Next Part …

So, back in the day, we had the beginning, we have had the middle, now what do we have? A Licence to? Print Money? The Foreign Exchange Market was now electronic, the Pound was happily trading against worldwide currencies, and the newly elected Govt had decided to “Privatise” a lot of the Crown Jewels as they were so called.

We saw the likes of Jaguar, British Telecom, the remainder of Cable and Wireless, which had already been sold, British Aerospace, Britoil and British Gas. Then the focus shifted to privatising core utilities.

However, like before when we were introduced to “market inside information” and certain individuals trading ahead of an announcement, or worse still, trading on inside information, one of the markets issues with the heavily discounted “Offers For Sale”, was that it was seen as a licence to make money – as the “Initial Offer For Sale” and the partly-paid versions of them were so heavily discounted, and so oversubscribed, that it was widely accepted that anybody who could get hold of some of these shares (especially in the initial floatation thereby avoiding Stockbrokers Bargain Commission) was guaranteed to (in some cases) at least double their money…

Some of us remember the television adverts and the marketing campaign behind these Issues and Govt Privatisation. The wheels were fully in motion and the Govt were dedicated to making the British Public shareholders in what were previously State Owned projects. So, what did the Institutions and Public do?

As we have just touched upon, when this licence to make money started to roll off of the Govts conveyor belt, the Public became more and more interested… They started to “apply” for Shares. Sadly though, this is where it (arguably) starts to go wrong (again)…

As we have touched upon earlier, if we were to look at the sheer number of daily executed transactions in any one particular Take-Over Situation just before the announcement we can clearly see that the volume of transactions is way over what is regarded as the “average daily volume”. In fact, this further lends itself to the other old stockbrokers favourite phrase – “Buy on the rumour – sell on the news”.

The rumour widely increasing the share price, and the news – being the announcement, of either confirmation, or denial – then the share price moves again. Often though, companies would make an announcement that they know of no reason why the share price is moving, to calm the market.

Some of you may remember the days of the dot com boom?

Here we had the City News-team of the Daily Mirror who called themselves “City Slickers” being convicted of what was effectively “Front Running” and guilty of a conspiracy to breach the Financial Services Act. This often involved the two financial journalists commenting on stock(s) that they already owned – knowing that it would result in the share price movement. One of them ended up spending two months at Her Majesties Pleasure.

So, although in the case of the two Mirror journalists the Crown successfully prosecuted two individuals, this was still seen as what was just another example of “its not WHAT you know it’s WHO you know”.

Some less than scrupulous analysts used to frequently tell their friends, colleagues and alike of the Stocks that they are about to publish a “research note” on, or announce a deal for.

In my own days as a Senior Stockbroker, I became very friendly with a number of journalists from the likes of The Investors Chronicle, the Daily Telegraph, The News of the World and other on-line financial websites.

They would frequently call me on my work phone and ask for “tips” to publish on-line or in the Newspapers at the weekend. However, I am pleased to say – that the now ‘Poacher turned Game-Keeper’ was not naïve enough to “tip” anything that I personally held, or had any interest in at all, and the tips that were made at the time, were only given after a considerable amount of research had been completed to evidence and back up the “buy” recommendation. Often, these tips would simply be a re-iteration of the Monthly Newsletter that I wrote and sent out to my Clients.

You can see though, that if you were less scrupulous, there is a definite possibility to act without integrity and to manipulate both the market, and share prices.

So with a shadow of suspicion placed over the City following the highly successful Privatisations and allegations of “Fat Cats” and “Wide Boys” being impersonated by comedians and so on, it became clear to the Govt, that a change was needed.

Regulation was here – and was here to stay. So, from the SRO (Self Regulation – in a Regulated Society) we had Statute(s) in Parliament passed, the Financial Services Act, came into force and we now had Regulators.

  • The Securities Association.
  • The Bank of England.
  • The Securities and Futures Association.
  • The Financial Services Authority.
  • The Financial Conduct Authority.
  • The Prudential Regulatory Authority.

And over in the European side of the fence with Europe now united, we had the Committee of European Securities Regulators (CESR) then change to become the European Securities and Markets Authority (ESMA).

This overarching regime or, regimes, it was hoped would put a stop to the somewhat sarcastic phrases of “Buy on the rumour, and sell on the news” and the ‘perception’ that the City is full of ‘Inside Information’ and only a few getting the rewards.

Its principal aim was to accomplish the return of “market confidence” and that share prices will be valued fairly on a basis of supply and demand and other factors such as the accompanying trading statements, reports and accounts and fundamentals of the Company, rather than the former.

Market Confidence, it was claimed, could only be restored if we instilled some kind of ‘authority’ to oversee it. And herein begins the Department now called “Regulatory Compliance”.

Compliance was initially stereotypically made up of middle aged back office, or “Operations Managers” as the Senior Management Team in those days didn’t really know WHO to put in Compliance and what the Mr. Average Compliance officer would be made up of.

Compliance would have in some companies a clipboard with a checklist on that it would literally go round and tick off to ensure that the Company were adhering to the Rules, and when walking into the “Pit” or the “Front Office/Lions Den” would be able to ensure that they were at least acting within the “spirit” of the Rules.

Often, inexperienced Compliance Officers simply wouldn’t know WHAT to look for OR in fact how to evidence it beit ‘real time’ or ‘historical’.

I personally, can recall many a time, and in many different dealing rooms that I have had the fortune to have worked and been in, – the Compliance Officer walking into the dealing room, only to be hit with a barrage of sarcasm, taunts and the boys metaphorically picking up their phones and shouting things like…..


“SELL!!” and “What was that Boss??”

“Shhhhh!!! – Compliance!!!


“Oh LOOK! Here comes the “Business Prevention Department!!”

It was fair to say, that the Front Office in the initial days of Regulation didn’t see Compliance as anything but a…

However, that too was all soon to all change…

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